Jose G. Luna

April 11, 2018 ITAD BIR RULING NO. 069-18 Sec. 106 (A) (2) (b), NIRC, as amended; Presidential Decree No. 292 Jose G. Luna Division Chief Large Taxpayers Division-Cebu Dear DC Luna, This refers to your Memorandum dated 07 December 2012, indorsed to this Office on 12 December 2013, referring to the letter of the Chief Accountant of Honda Cars Cebu, Inc. requesting confirmation that the Southeast Asian Fisheries Development Center (SEAFDEC)-Aquaculture Department (AQD) is exempt from value-added tax as well as other taxes as provided in a ruling issued by the Bureau of Internal Revenue dated 14 March 2007. HTcADC In reply, please be informed that Section 106 (A) (2) (b) of the National Internal Revenue Code (NIRC), as amended, 1 provides that sales by VAT-registered persons to persons or entities whose exemption under special laws or international agreements to which the Philippines is a signatory shall be subject to zero percent (0%) rate, thus: "Section 106. Value-Added Tax on Sale of Goods or Properties. (A) Rate and Base of Tax. There shall be levied, assessed and collected on every sale, barter or exchange of goods or properties, a value-added tax equivalent to twelve percent (12%) of the gross selling price or gross value in money of the goods or properties sold, bartered or exchanged, such tax to be paid by the seller or transferor. (i) Value-Added Tax collection as a percentage of Gross Domestic Product (GDP) of the previous year exceeds two and four-fifth percent (2 4/5%);or (ii) National government deficit as a percentage of GDP of the previous year exceeds one and one-half percent (1 1/2%).x x x (2) Zero-rated Sales The following sales by VAT-registered persons shall be subject to zero percent (0%) rate: xxx xxx xxx (b) Sales to persons or entities whose exemption under special laws or international agreements to which the Philippines is a signatory effectively subjects such sales to zero rate. xxx xxx xxx" In relation thereto, Presidential Decree (PD) No. 292 dated 13 September 1973 entitled "Defining the Status of, and Authorizing the Grant of Tax Exemption and Other Privileges to the Aquaculture Department of the Southeast Asian Fisheries Development Center in the Philippines" is relevant in this case. Sections 1 and 2 of PD 292 provides that: "Section 1. The provisions of existing laws, decrees or ordinances to the contrary notwithstanding, the Aquaculture Department of the Southeast Asian Fisheries Development Center shall be exempt from the payment of gift, franchises, specific, percentage, real property and all other taxes ,duties and fees provided under existing laws decrees or ordinances. This exemption shall extend to goods imported and owned by the said Aquaculture Department and to goods brought in or imported for the personal use of foreign personnel whose services are paid by the said Aquaculture Department: Provided, however, that this exemption is without prejudice to the collection of customs duties and taxes on goods or articles brought or imported into the Philippines for the use of such foreign personnel should such goods or articles subsequently be sold, transferred or exchanged in the Philippines to persons or entities not entitled to exemption from said customs duties and taxes pursuant to existing laws and regulations governing the matter. Section 2. All gifts, bequest, donations and contributions which may be received by the said Aquaculture Department from any source whatsoever shall be exempt from the payment of taxes imposed under the National Internal Revenue C od e and all such gifts, bequests, donations and contributions shall be considered as allowable deduction for purposes of determining the income tax payable by the donor. All funds received by the Department shall receipted and disbursed in accordance with the Agreement establishing the Southeast Asian Fisheries Development Center and pertinent resolutions duly approved by the SEAFDEC Council. xxx xxx xxx" Based on the above provisions, SEAFDEC-AQD is exempt from donor's tax, percentage tax and other taxes under existing laws, decrees or ordinances. Accordingly, this Office hereby confirms that SEAFDEC-AQD shall be subject to VAT at zero-percent (0%) rate pursuant to Section 106 (A) (2) (c) of the NIRC of 1997, as amended. This ruling is issued on the basis of the facts as represented. However, if upon investigation it shall be disclosed that the actual facts are different, then this ruling shall be without force and effect insofar as the herein parties are concerned. aScITE Very truly yours, (SGD.) CAESAR R. DULAY Commissioner of Internal Revenue Footnotes 1. As amended by Republic Act No. 10963, otherwise known as the TRAIN Law.