DLD Furniture & Accessories International, Inc.

April 13, 2007 VAT RULING NO. 004-07 R.R. # 16-2005; DA-307-2006 DLD Furniture & Accessories International, Inc. Quano Compound, Brgy. Apao Mandaue City Attention: Mr. Allan Montessa President Gentlemen : This refers to your letter dated July 5, 2006 requesting confirmation of your opinion that you qualify for automatic VAT zero-rating on your export sales under Section 106 (A) (2) (a) (1) of the Tax Code of 1997, as amended. It could be ascertained from the documents submitted that DLD Furniture & Accessories Int'l., Inc. (DLD Furniture, for short) is a domestic corporation registered with the Securities and Exchange Commission (SEC) on January 11, 2006; that its primary purpose is to engage in the manufacture and exportation of furniture and accessories; that it is registered with this Bureau as a VAT-registered entity; that it exports 100% of its finished products; that it is your opinion that being an exporter of 100% of your finished products, you are qualified for an automatic zero-rated sales pursuant to Sec. 106(A)(2)(a)(1) of the Tax Code of 1997. In reply, please be informed that Section 4.106-5 (a) (1) of Revenue Regulations No. 16-2005 dated September 1, 2005, provides, viz: "SEC. 4.106-5. Zero-Rated Sales of Goods or Properties . A zero-rated sale of goods or properties (by a VAT-registered person) is a taxable transaction for VAT purposes, but shall not result in any output tax. However, the input tax on purchases of goods, properties or services, related to such zero-rated sale, shall be available as tax credit or refund in accordance with these regulations. The following sales by VAT-registered persons shall be subject to zero percent (0%) rate: (a) Export Sales. "Export Sales" shall mean: (1) The sale and actual shipment of goods from the Philippines to a foreign country, irrespective of any shipping arrangement that may be agreed upon which may influence or determine the transfer of ownership of the goods so exported, paid for in acceptable foreign currency or its equivalent in goods or services, and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP) ." (Emphasis supplied) Thus, if the conditions set forth above are complied with, DLD Furniture's export sales are entitled to the benefit of the zero percent (0%) VAT, pursuant to Section 106 (A) (2) (a) (1) of the Tax Code of 1997, as implemented by Section 4.106-5 (a) (1) of Revenue Regulations No. 16-2005. cACHSE 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, (SGD.) GREGORIO V. CABANTAC Deputy Commissioner