VAT Ruling No. 002-99

January 7, 1999 VAT RULING NO. 002-99 Sec. 109 (d)-028-98-002-99 Metrovet, Inc. JBL Building 150 Panay Avenue Quezon City Attention: Dr . Lorenzo A . Mapua, Jr . General Manager Gentlemen : This refers to your letter dated October 9, 1998 requesting for confirmation of your opinion that the products imported and sold by your company being described as livestock feed ingredients would not be subject to the payment of the value-added tax. It is represented that METROVET is engaged in the importation and distribution of veterinary products; that among others, it imports the following products: a. PRELAC Skimmed Milk Powder Replacer, Supplementary Feed for Animals; certified as Feed Ingredients by the Bureau of Animal Industry (BAI) per its reference no. CIP No. 98-1584; b. SEROLAT Crude protein/lactose formula based on milk ingredients; Compound feed for young animals; certified as Feed Ingredients by BAI per its reference no. CIP No. 98-0600; c. PORCOLAC Acidified milk replacer for piglets intended as a supplement to sow's milk; certified as Feed Ingredient by BAI per its reference no. CIP No. 98-1585; d. CALPRONA-CA Feed powder or agglomerate used as compound feed; certified as Feed Ingredients by BAI as per its reference no. CIP No. 98-2876; e. AMOFAC High protein solubles consisting of corn distillers, dried grains, fish soluble factor and lucerne-whey factors, etc.; certified as Complete Feed by BAI per its reference no. CIP No. 97-1889; f. BIO-ADD Decontamination of feed raw materials and finished feed from bacterial organisms such as salmonella, campylobacteria, clostridia and others, which can be associated with feeds; certified as Feed Additive by BAI per its reference no. CIP No. 97-4773; g. ANTITOX PLUS Cure for fertility problems in swine; prevention of oestrogenic syndrome and rectal prolapses; prevention of diarrhea; No BAI certification; h. CTC 100 A potent broad-spectrum antibiotic premix for growth promotion, improvement of feed efficiency and for the prevention and control of a wide range of disease problems in livestock and poultry; certified as Feed Additive by BAI per its reference no. CIP No. 98-0575. In reply, please be informed that Section 109(d) of the Tax Code of 1997 provides that sale or importation of fertilizers, seeds, seedlings and fingerlings; fish, prawn, livestock and poultry feeds, including ingredients, whether locally produced or imported, used in the manufacture of finished feeds (except specialty feeds for race horses, fighting cocks, aquarium fish, zoo animals and other animals generally considered as pets) shall be exempt from the value-added tax (VAT). The foregoing provision refers to three transactions as being exempted from VAT, namely: 1. Sale or importation of fertilizers, seeds, seedlings and fingerlings; 2. Sale or importation of fish, prawn, livestock and poultry feeds; and 3. Sale or importation of feed ingredients used in the manufacture of fish, prawn, livestock and poultry feeds. Item 3 above refers to ingredients used in the manufacture of animal feeds. And the word "ingredients" or phrase "feed ingredients" is defined under Republic Act No. 1556, as amended by Presidential Decree No. 7, and implemented by Administrative Order No. 35 dated September 23, 1975, as "any single article of feed or feeding stuff which enters into the composition of a ration, concentrate, or supplement". Based on this definition, the phrase "feed additives" or "feed supplements" is deemed to be within the purview of the term "feed ingredients". (BIR Ruling No. 028-98 dated September 15, 1998). It is significant to note that since the manufacture, importation, sale or distribution of feeds or feeding stuff require a prior registration and permit from the Bureau of Animal Industry (BAI) under Republic Act No. 1556, as amended by Presidential Decree No. 7, the certification on the nature and composition of the commodities/items as stated in the registration and import permit issued by BAI will govern the classification of the said items for purposes of VAT exemption under Section 109(d) of the Tax Code of 1997. Accordingly, the importation and sale of the items listed above, with the exception of ANTITOX PLUS for which no BAI-certification was provided, shall be exempt from the imposition of VAT. However, it is required that in all cases of importation of the goods/items referred to above, the same shall not be released from customs custody unless a duly approved Authority to Release Imported Goods (ATRIG) is secured from the appropriate Office of the BIR. llcd This ruling is being issued on the basis of the foregoing facts as represented. If upon investigation, it shall be disclosed that the facts are different, then this ruling shall be rendered null and void. Very truly yours, Commissioner of Internal Revenue By: (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner Legal & Enforcement Group