Ong, Ordoñez & Associates

March 7, 2008 VAT RULING NO. 001-08 RR 11-00; 237 Ong, Ordoez & Associates 8F 111 Paseo de Roxas Bldg. Paseo de Roxas cor. Legazpi Street Legazpi Vill., Makati City Attention: Ms. Catherine M. Saldi Gentlemen : This refers to your letter dated May 31, 2006 requesting for a ruling which will allow your client, INCO7 Inc., to use/issue purchase invoices to peddlers as evidence/supporting documents to their transaction. It is represented that the business of INCO7 Inc. is related to manufacturing and trading of metal products; that it is duly registered with the Securities and Exchange Commission under SEC Registration No. CS200514460, dated August 24, 2005; that its primary purpose is to engage in the business of import/export/trading of goods such as metal scrap, waste, junk and general merchandise on wholesale/retail basis; that most of its suppliers are peddlers or those who sell goods on carts (wheeled wagons); or those called peddlers; and that most of these peddlers are marginal income earners and are not registered with the Bureau of Internal Revenue and that they do not issue any registered invoice in their sales transactions. In reply, please be informed that pursuant to Section 237 of the Tax Code of 1997, "all persons subject to an internal revenue tax shall, for each sale or transfer of merchandise or for services rendered valued at twenty-five pesos (P25.00) or more, issue duly registered receipts or sales or commercial invoices prepared at least in duplicate, showing the date of transaction, quantity, unit cost and description of merchandise or nature of service. . . . However, the Commissioner may, in meritorious cases, exempt any person subject to an internal revenue tax from compliance with the provisions of this Section." Corollary thereto, under Revenue Audit Memorandum Order No. 1-2000, the business document that serves as evidence of a purchase transaction is the purchase invoice. In addition, Section 4 (A) (3) and (4) of Revenue Regulations No. 11-2000 provides, viz .: "Section 4. Tax Compliance Requirement . "Marginal income earners", who are possible income tax filers and recipients or payors of income payments subject to withholding tax and registered with the Bureau of Internal Revenue, shall be entitled to the following privileges and minimum tax compliance requirements: A. Compliance to Registration and Bookkeeping Rules xxx xxx xxx (3) Exemption from compliance with the issuance of registered receipts or sales/commercial invoices prescribed under Section 237 of the Tax Code of 1997. cDEHIC (4) Exemption from the requirement of maintenance of books of accounts." Considering that your suppliers are marginal income earners that do not have the capacity to issue any registered invoice on their sales transactions and are likewise exempt from the issuance thereof pursuant to the provisions of RR 11-2000 the issuance of a purchase invoice to peddlers of metal scrap, wastes and junks who are marginal income earners as evidence to support your purchases is the best alternative. This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be disclosed that the facts are different, then this ruling shall be considered null and void. Very truly yours, Commissioner of Internal Revenue By: (SGD.) GREGORIO V. CABANTAC Deputy Commissioner