SGV & Co.

December 3, 2008 VAT RULING NO. 012-08 Sec. 109 (1) (B); Vat Ruling No. 011-99 SGV & Co. 6760 Ayala Avenue 1226 Makati City Attention: Atty. Mark Anthony P. Tamayo Partner, Tax & Customs Services Gentlemen : This refers to your letter dated July 4, 2007 requesting confirmation of your opinion that the importation of whey to be used solely as a feed ingredient is exempt from value-added tax (VAT) pursuant to Section 109 (1) (B) of the Tax Code of 1997, as amended. TAcCDI It is represented that your client, Cargill Philippines, Inc. ("Cargill"), is a domestic corporation engaged in the production, marketing and sale of animal feeds; that it is registered with the Bureau of Internal Revenue (BIR) as a VAT taxpayer; that it is duly registered with the Bureau of Animal Industry (BAI) as a mixed feed manufacturer and feed stuff importer under BAI Registration No. M-635 and M-955, respectively; that based on BAI Import Permit Nos. IP-07-5858 dated May 30, 2007 and IP-07-5162 dated May 10, 2007, Cargill imported a total of 110 metric tons (MT) of deproteinized whey powder; and that such ingredient has been certified as a feed ingredient by the BAI under Registration No. M-955, hence, it is your view that such importation of whey powder is exempt from the imposition of VAT. In reply, please be informed that Section 109 (1) (B) of the Tax Code, as amended, provides in part as follows: "(1) Subject to the provisions of subsection (2) hereof, the following transactions shall be exempt from the value added tax: (A) Sale or importation of agricultural and marine food products xxx xxx xxx (B) 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 ) " [emphasis supplied] Cargill's importation of whey if to be used solely as a feed ingredient falls squarely within the above mentioned provision. ASaTHc In VAT Ruling No. 011-99 dated January 21, 1999, we ruled that the importation of whey powder certified by the BAI as a feed ingredient to be used for livestock, poultry and agricultural feeds is exempt from the imposition of VAT, viz.: "In reply, please be informed that Section 4 of the Tax Code of 1997 vests upon the Commissioner of Internal Revenue the exclusive power to interpret the provisions of the Tax Code and other tax laws, subject to the review by the Secretary of Finance. Hence, in determining whether or not the importation of a particular commodity is exempt from the imposition of VAT, it is the opinion of the Commissioner of Internal Revenue which shall prevail over that of the Commissioner of Customs. With respect to the VAT exemption of feed ingredients, Section 109(d) of the Tax Code of 1997 provides that the "sale or importation of fertilizers; seeds, seedling 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)", is exempt from value-added tax (VAT). The foregoing provision refers to three transactions as being exempted from VAT, namely: 1. Sale or importation of fertilizers; 2. Sale or importation of seeds, seedling and fingerlings; 3. Sale or importation of 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, cocks, aquarium fish, zoo animals and other animals generally considered as pets). CHcTIA The word "ingredients" or "feed ingredients" is defined under Republic Act No. 1556, as amended by Presidential Decree No. 7, and implemented by Administrative Order No. 35 dated September 23, 1975 as "any single article of food or feeding stuff which enters into the composition of a ration, concentrate, or supplement." Such being the case, we confirm your opinion that importation of whey products used as a feed ingredient is exempt from the imposition of 12% VAT. Provided that these whey products are used exclusively for the production of livestock and poultry feeds, and not for specialty feeds for race horses, fighting cocks, aquarium fish, zoo animals and other animals generally considered as pets nor even for human consumption. This ruling is 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. TcADCI Commissioner of Internal Revenue By: (SGD.) GREGORIO V. CABANTAC Deputy Commissioner