VAT Ruling No. 012-04

May 14, 2004 VAT RULING NO. 012-04 Sec. 109 (d) VAT Ruling No. 042-2003 Reuse Commodities, Inc. No. 2 Dama de Noche Street UPS-4 Paraaque City Attention: Mr. Miguel N. Atayde General Manager Gentlemen : This refers to your letter dated October 7, 2003 requesting for a ruling as to whether or not your company, a Non-VAT registered entity, is still exempt from value-added tax under Section 109(d) notwithstanding that its gross sales exceed P550,000.00. It appears that your company is a domestic corporation duly registered with the Securities and Exchange Commission (SEC) under SEC Registration No. A199804991 dated March 4, 2002 and is likewise registered with the Bureau of Internal Revenue (BIR) as a Non-VAT entity under Certificate of Registration No. OCN-9RC0000026656; and that it is engaged in the sale of livestock and poultry feeds including ingredients, whether locally produced or imported to be used in the manufacture of its finished feeds. In reply thereto, please be informed that Section 109(d) of the Tax Code of 1997 provides that the sale or importation of fertilizers, seeds, seedlings and fingerlings, fish prawn, livestock and poultry feeds, including ingredients, whether locally produced or imported, used in the manufacture of finished feeds (except specialty feeds for race horses, fighting cocks, aquarium fish, zoo animals and other animals generally considered as pets) shall be exempt from value-added tax. On the other hand, Section 109(z) of the same Code provides that the sale or lease of goods or properties or the performance of services other than the transactions mentioned in the preceding paragraphs, the gross annual sales and/or receipts do not exceed the amount of P550,000.00 shall be exempt from value-added tax. It is significant to note that paragraph (d) of the said Section does not provide for the amount of threshold in order for the transaction to be considered as VAT exempt. The law merely concerns itself and is directed on the sale or importation of animal feeds and ingredients or ingredients used in the manufacture of the same. Conversely, paragraph (z) of Section 109 in providing for the exemption of the sale or lease of goods or properties or the performance of services from VAT, the law requires that; (1) the annual gross sales and/or receipts should not exceed P550,000.00 and, (2) the transaction is other than those mentioned in the other subsections of the aforesaid Section 109. Accordingly, this Office holds that your company which is engaged in the sale of livestock and poultry feeds and its ingredients which are used in the manufacture of its finished feeds, although its gross sales and/or receipts exceed P550,000.00 as prescribed in section 109(z) of the Tax Code of 1997, is exempt from VAT under Section 109(d) of the said Code. 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. EcAHDT Very truly yours, (SGD.) JOSE MARIO C. BUAG Deputy Commissioner Legal and Inspection Group