VAT Ruling No. 003-02

February 6, 2002 VAT RULING NO. 003-02 RMO 9-2000 036-2001 Quorum Lanier Philippines Inc. Eastgate Centre Bldg. 169 EDSA, Mandaluyong City Metro Manila Attention: Jose Ricardo M. Moran General Manager Gentlemen : This refers to your letter dated July 04, 2001 requesting for an automatic VAT zero rating treatment of your domestic suppliers on the ground that your company is a BOI-registered enterprise classified as 100% Export Producer of Magnetic Database. It is represented that your company, Quorum Lanier Philippines, Inc. (Quorum) is a wholly-owned subsidiary of Lanier Litigation Services, Inc. and is registered with the Board of Investments (BOI) under Certificate of Registration No. EP-93-179 as a New Export Producer of Magnetic Database; that you have secured another registration certificate with the BOI for your expansion program as an Expanding Export Producer of Magnetic Database under Certificate of Registration No. EP-98-186; that as a BOI-registered enterprise, all your manufactured products are 100% exported as evidenced by the Certification issued by the BOI dated August 16, 2001; that in your line of business you spend a substantial amount of money on various supplies, such as paper (you encode about 2,000,000 pages a month), folders, printer tones, marking implements, diskettes, label, tags, and the like; that in your purchase of these supplies you incur a substantial amount of input taxes for which you file a claim for the issuance of tax credit certificate with the Department of Finance. To streamline the process, you now request that your domestic suppliers be granted the privilege of automatic VAT zero-rating on their sales of supplies to your company. In reply, please be informed that Section 2 of RMO 9-2000 provides in part: "The rationale of RMC 74-99 may also find application to sales made by VAT registered suppliers to BOI -registered enterprises whose manufactured products are 100% exported to foreign countries and therefore said sales can likewise be accorded automatic zero-rating treatment." Based on the abovequoted provision, it is clear that your VAT-registered suppliers can be accorded automatic VAT zero rating without the necessity of applying for and securing prior approval for zero-rating, provided, however, that all the conditions set forth in Section 3 of RMO 9-2000 are complied with, viz : "SEC. 3. Sales of goods, properties or services made by a VAT-registered supplier to a BOI-registered exporter shall be accorded automatic zero-rating, i.e., without necessity of applying for and securing approval of the application for zero-rating as provided in Revenue Regulations No. 7-95, subject to the following conditions: (1) The supplier must be VAT-registered, (2) The BOI-registered buyer must likewise be VAT-registered; (3) The buyer must be a BOI-registered manufacturer/producer whose products are 100% exported. For this purpose a Certification to this effect must be issued by the Board of Investments (BOI) and which certification shall be good for one year unless subsequently re-issued by the BOI; (4) The BOI-registered buyer shall furnish each of its suppliers with a copy of the aforementioned BOI Certification which shall serve as authority for the supplier to avail of the benefits of zero-rating for its sales to said BOI-registered buyers; and (5) The VAT-registered supplier shall issue for each sale to BOI-registered manufacturer/exporters a duly-registered VAT invoice with the words "zero-rated" stamped thereon in compliance with Sec. 4.108-1(5) of RR 7-95. The supplier must likewise indicate in the VAT invoice the name and BOI-registry number of the buyer." 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.) EDMUNDO P. GUEVARA Deputy Commissioner Legal and Inspection Group