VAT Ruling No. 001-92

January 2, 1992 VAT RULING NO. 001-92 104 (a) (A) 000-00 Philippine Charter Insurance Corporation 15th Floor, Tytana Building Plaza Lorenzo Ruiz Binondo, Manila Attention: Emmanuel R. Que Vice-President & Asst. Controller Gentlemen : This refers to your letter dated July 11, 1989 requesting a ruling on whether or not the assured can claim the total cost and the input tax on the imported merchandise which were razed by fire. It is represented that Adamson and Adamson is a domestic corporation duly registered with the Bureau of Internal Revenue as a VAT-registered enterprise; that all its business activities are registered under the VAT; that it imported goods in 1988 as shown in the import entry declaration and confirmation receipts and paid the corresponding customs duties and taxes including value-added tax; that these imported goods were insured by the Philippine Charter Insurance Corporation (PCIC); that on July 7, 1988, the warehouse containing the imported raw material was razed by fire and most of the goods were burned; and that the assured claim insurance benefits for the loss; that the assured included in its claim the 10% VAT paid thereon because they believed that it will no longer be considered as an input tax credit against its output tax. HICcSA In reply, please be informed that based on the foregoing facts, the assured is precluded from claiming an input tax credit because under Section 104 (a) (A) of the Tax Code, in so far as imported raw materials are concerned, the same should be processed into and made a component part of a finished product before it could legally be considered as a creditable input tax to the VAT payable on such product. In other words, there can be no tax-crediting if the raw material has not been an input in the production of any particular product. In this case, inasmuch as the raw materials were lost in the bodega where it was stored because of the fire that razed it, before being utilized in the production, the VAT paid thereon could not be allowed as an input on the output tax of the manufactured/processed product. Very truly yours, (SGD.) JOSE U. ONG Commissioner of Internal Revenue