VAT Ruling No. 010-02

March 6, 2002 VAT RULING NO. 010-02 RMO 9-2000 000-00 Director Carl John G. Matriano Basic Industries Department Board of Investments (BOI) Industry & Investments Building 385 Sen. Gil J. Puyat Avenue Makati City Dear Director Matriano : This refers to your letter, dated September 11, 2001, concerning your request for clarification whether a BOI-registered firm "that has temporarily suspended its operations since 1999 (prior to the issuance of RMO No. 9-2000) but has exported 100% of its residual materials out of the cleaning-up operations in 2000 could be accorded automatic VAT zero-rating in its transactions considering that at present, it is undertaking maintenance and exploration and drilling activities." In reply, please be informed that the benefit of the zero percent (0%) VAT under RMO No. 9-2000, dated February 02, 2000, is applicable only to a VAT-registered supplier of a BOI-registered exporter whose products are 100% exported, as follows: "SEC. 3. Sales of goods, properties or services made by a VAT-registered supplier to a BOI-registered exporter shall be accorded automatic zero-rating, i.e., without necessity of applying for and securing approval of the application for zero-rating as provided in Revenue Regulations No. 7-95, subject to the following conditions: "(1) The supplier must be VAT-registered; "(2) The BOI-registered buyer must likewise be VAT-registered; "(3) The buyer must be a BOI-registered manufacturer/producer whose products are 100% exported . For this purpose a Certification to this effect must be issued by the Board of Investments (BOI) and which certification shall be good for one year unless subsequently re-issued by the BOI; "(4) . . . "(5) . . . " Since the above mentioned enterprise has temporarily suspended its operations since the year 1999 and, therefore, not engaged in the manufacture of products for export but, instead, is currently engaged in "maintenance and exploration and drilling activities," its VAT-registered suppliers are not entitled to the benefit of the zero percent (0%) value added tax (VAT ). Very truly yours, Commissioner of Internal Revenue By: (SGD.) EDMUNDO P. GUEVARA Deputy Commissioner Legal & Inspection Group