VAT Ruling No. 007-05

June 23, 2005 VAT RULING NO. 007-05 Sec. 108 (B); 044-98 Visayas Airport Services Corporation IPT Bldg., Mactan-Cebu International Airport Lapu-Lapu City, Cebu Attention: Fernando V. Detaunan VP/Group Controller Gentlemen : This refers to your letter dated March 2, 2005 requesting for a ruling that your ground handling services provided to international airlines are subject to zero-rating for VAT purposes. The facts, as you represent, are as follows: VISAYAS AIRPORT SERVICES CORPORATION (VASC for brevity) is a domestic corporation with SEC Registration No. A1998-12974 dated October 14, 1998. You started your commercial operations on September 16, 2000. Based at the Mactan Cebu International Airport, Lapu-Lapu City, Cebu, you operate, among others, as a passenger and cargo service exporter catering to such international airlines Cathay Pacific Airways, Mandarin Airlines, Federal Express, Korean Airlines, Uni Air, and Silk Air. You provide ground handling services ranging from export cargo acceptance, cargo crating, cargo checking and re-weighing, towing, out/delivery of cargo to the plane side and temporary warehousing. You also do passenger and ramp handling services, which include but not limited to passenger and baggage check-in, passenger profiling, cargo loading and unloading, load planning, aircraft towing and servicing, cabin cleaning, and lost and found services. You bill and get paid in US dollars. Your dollar depository accounts are with UCPB Mandaue Branch and UCPB Paseo Branch and your customer payments come either via wire transfer or via dollar checks. aCTcDS In reply, please be informed that in VAT Ruling No. 044-98 dated November 26, 1998, the BIR opined that: "Section 108(B), NIRC, as amended, is implemented by Section 3(b) of Revenue Regulations No. 7-95, as amended by Section 4.102-2(b) of Revenue Regulations No. 5-96, provides as follows: SEC. 3. Zero rating. (a) . . . (b) Transactions subject to zero percent (0%) rate. The following services performed in the Philippines by VAT-registered persons shall be subject to zero percent (0%) rate: xxx xxx xxx (4) Services rendered to vessels engaged exclusively in international shipping; xxx xxx xxx The above provision speaks of services rendered to vessels engaged exclusively in international shipping. However, applying the doctrine of statutory construction of ejusdem generis where general terms follow the designation of particular things or classes of persons or subjects, the general term will be construed to include those things or persons of the same class or of the same nature as those specifically enumerated, the same provision, likewise, covers aircraft carrier. Accordingly, the services of your client to international air carriers of various International Airline Companies which are destined for use or consumption outside the Philippines since the same are directly connected to international flights of the aforesaid international air carriers are subject to zero percent (0%) VAT pursuant to Section 108(B), NIRC, as amended by R.A. Nos. 7716 and 8241, renumbered by R.A. No. 8424, and as implemented by Section 3(b) of Revenue Regulations No. 7-95, as amended by Section 4.102-2(b) of Revenue Regulations No. 5-96 ." (Emphasis supplied.) Applying the foregoing to the case at bar, it is the opinion of this Office your services, as enumerated above, rendered to international airlines are subject to zero percent (0%) VAT. This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be ascertained that the facts are different, then this ruling shall be considered void. Very truly yours, Commissioner of Internal Revenue By: (SGD.) JOSE C. BUAG Deputy Commissioner Legal & Inspection Group