VAT Ruling No. 008-05

June 23, 2005 VAT RULING NO. 008-05 Sec. 108 (B); 044-98 Mindanao Airport Services Corporation G/F IPT Building, Davao International Airport Sasa, Davao City Attention: Agustin I. Soriano Station Manager Gentlemen : This refers to your letter dated April 25, 2003, which was received by this Office last March 2, 2005, requesting for a confirmation that your income payments derived from ground handling of international airlines be subject to zero-rating for VAT purposes. The facts, as you represent, are as follows: MINDANAO AIRPORT SERVICES CORPORATION (MASCOR for brevity) is a domestic corporation with SEC Registration No. A 1998-12974 dated September 16, 1998 and TIN 005-879-275. You are domiciled at the Davao International Airport providing ground handling services to such international airlines such as Bouraq Airlines and Silk Air. Your services include but are not limited to passenger and baggage check-in, load planning, inbound and outbound cargo handling, ground handling equipment provisions, and lost luggage assistance. Your ground handling agreements with the airlines are denominated in US dollars. As, such, all your invoices/billings are expressed in dollars. The airlines remit their payments in US dollars are also either via telegraphic transfer or draft, which you deposit to your USD account maintained with UCPB-Magsaysay branch. 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. EcaDCI 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." Applying the foregoing to the case at bar, it is the opinion of this Office that ground handling services rendered by MASCOR 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 MARIO C. BUAG Deputy Commissioner Legal & Inspection Group