VAT Ruling No. 005-93

February 2, 1993 VAT RULING NO. 005-93 R.R. 2-89 102-92 005-93 Board of Investments Mining and Metallurgical Industries Department Industry and Investments Bldg. 385 Gil J. Puyat Avenue Makati, Metro Manila Attention: Mr . Elmer C . Hernandez Officer-In-Charge Gentlemen : This refers to your letter dated May 14, 1991 relative to the applications of suppliers for VAT zero-rating of their sale of raw materials to BOI-registered firms. You would like to be clarified on the following: (1) Are the raw material purchases of a BOI-registered enterprise qualified to VAT zero-rating if said materials is utilized as input to but not forming part of an export product? (2) Is zero-rating allowed on second step transaction? In reply, please be informed that pursuant to Section 2 of Revenue Regulation 2-88, only sales of raw materials to BOI-registered export oriented enterprises whose export sales exceed 70% of the total production shall qualify as effectively zero-rated. Said raw materials should also form part of the finished products that would eventually be exported. Since as represented the sales are made only to BOI-registered (not export-oriented) enterprises, they do not fall within the purview of Revenue Regulations No. 2-88 for purposes of zero-rating. Likewise, no zero-rating would be allowed on second-step transactions. Very truly yours, JOSE U. ONG Commissioner of Internal Revenue