VAT Ruling No. 007-98

January 29, 1998 VAT RULING NO. 007-98 Sec. 103 (B) (K)-000-007-98 Bayucan Agricultural Development Corporation Rm. 205 Antonio Center No. 94 Kamuning Rd. Quezon City Attention: Mr . Victor P . Juat Chairman & President Gentlemen : This refers to you letter dated October 14, 1997 requesting a ruling whether or not your company which is engaged in rendering agricultural services to the farm of the mother/parent company is VAT exempt. cdtech It is represented that for purposes of filing with Bureau of Internal Revenue, you have considered your company as VAT-exempt since it is rendering agricultural services to the farm of the mother/parent company, A Brown Company, Incorporated, formerly Epic Holdings Corporation; that for this function, your Company received a fixed amount to cover the expenses for salaries, utility cost and other operating rent; that the amount of reimbursement is subject to adjustment, if necessary; that your company does not own fixed assets except for hand tools used in the cultivation of the soil; that the Agricultural Service Contract with the mother company provides that your company shall perform the following: a) planting and cultivating of fruit bearing trees and other farm products; b) raising and fattening and pasturing of large and small cattle and similar stocks; c) develop and operate fishponds, fishpens and fishing rights. In reply, please be informed that agricultural contract growers are exempted from value added tax on their sale of services pursuant to Section 103 (k) of the National Internal Revenue Code. The term agricultural contract growers " refer to those producing for others poultry, livestock or other agricultural and marine food products in their original state ." (Sec. 4.103-1(B) (k), Revenue Regulations No. 7-95) cdll Your sale of services to your mother company, A Brown Company, Inc., involving (a) planting and cultivating of fruit bearing trees and other farm products; (b) raising and fattening and pasturing of large and small cattle and similar stocks; and (c) development and operation of fishponds, fishpens and fishing rights are considered within the purview of Section 103(k), NIRC, as implemented by the aforesaid Revenue Regulations, hence, exempted from the value added tax. 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. prcd Very truly yours, SIXTO S. ESQUIVIAS IV Deputy Commissioner Legal & Enforcement Group