American Technologies, Inc.

August 11, 2008 VAT RULING NO. 008-08 Sec. 4.106-5 (a) (6) American Technologies, Inc. ATI Building, 455 Gen. Bautista St., San Juan, Metro Manila Attention: Ms. Leni Merlie B. Macalalad VP-Finance M a d a m : This refers to your letter dated January 15, 2008 requesting for a ruling as to whether or not goods sold to an international shipping company is subject to 0% VAT as provided for in Revenue Regulation No. 16-2005. CacISA You represented that your company, AMERICAN TECHNOLOGIES, INC. (ATI), is a domestic corporation registered with the Securities and Exchange Commission. It is engaged in the distribution of high-end IT products to target clientele within the Philippines consisting mainly of infocus projectors, fujixerox printers, etc. Likewise, your company renders installation and maintenance services for your products. It is further represented that one of your valued clients, AMERICAN PRESIDENT LINES COMPANY, INC. (APL), an international shipping company, would like to purchase some of your products. You are now seeking confirmation as whether the sale of your products to APL would be subject to 0% VAT as provided for in Revenue Regulations No. 16-2005. In reply, please be informed that SEC. 4.106-5 (a) (6) of Revenue Regulations 16-2005 provides as follows: 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. aDTSHc The following sales by VAT-registered persons shall be subject to zero percent (0%) rate: (a) Export sales. "Export Sales" shall mean: (1) . . . (2) . . . (3) . . . (4) . . . (5) . . . (6) The sale of goods, supplies, equipment and fuel to persons engaged in international shipping or international air transport operations; Provided, That the same is limited to goods, supplies, equipment and fuel pertaining to or attributable to the transport of goods and passengers from a port in the Philippines directly to a foreign port without docking or stopping at any other port in the Philippines; Provided, further, that if any portion of such fuel, goods or supplies is used for purposes other than that mentioned in this paragraph, such portion of fuel, goods and supplies shall be subject to 10% VAT. (Emphasis supplied) ATSIED Under the said provision, sales of goods, supplies, equipments, fuel and services to persons engaged in international shipping are subject to VAT at zero percent (0%). Provided that (1) the same is limited to goods, supplies, equipment, fuel and services pertaining to or attributable to the transport of goods and passengers from a port in the Philippines directly to a foreign port without docking or stopping at any port in the Philippines, and (2) if any portion of such fuel, goods or supplies is used for purposes other than that mentioned in the said paragraph, such portion of fuel, goods and supplies shall be subject to 10% VAT (now 12%). The products you enumerated such as projectors, fujixerox, printers, etc. do not pertain to or is not directly attributable to the transport of goods and passengers from a port in the Philippines directly to a foreign port. Such being the case, your said sale is not zero rated, but is appropriately subject to the imposition of the 12% VAT. 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. EACIcH Very truly yours, (SGD.) GREGORIO V. CABANTAC Deputy Commissioner