VAT Ruling No. 013-90

January 18, 1990 VAT RULING NO. 013-90 100 (a)/102 (a)-000-00-013-90 Garment Business Association of the Philippines Suite 304 Alexander House 132 Amorsolo, St., Legaspi Village Makati, Metro Manila Attention: Mr . Anastacio Delos Reyes President S i r s : This refers to your letter dated February 9, 1989, representing that a member of your association, the Hunter Garments Manufacturing (Phils.), Inc., is a BOI-registered exporter under Republic Act No. 6135, doing business either in: 1) Full FOB terms, where the exporter imports the raw materials and produces the garment for export; or 2) CMT/CMP basis (on consignment basis) where the foreign buyer supplies the materials for the production of garments for re-export. Based on the foregoing, you now seek clarification on whether it should be classified as an export producer inspite of doing consignment business (and therefore exempted from the payment of the contractor's tax) or as a service company taxable under the Tax Code. In reply, please be informed that the sale of garments produced by your company for export is subject to the value-added tax at zero-rate, in accordance with Section 100(a)(1) of the Tax Code, as amended. On the other hand, business activities wherein the foreign buyer supplies the materials for the production of garments for re-export on consignment basis are subject to zero-rate only if the compensation or fee for the services rendered is paid for in acceptable foreign currency and inwardly remitted to the Philippines, pursuant to Section 102(a)(2) of the same Code. LexLib Very truly yours, JOSE U. ONG Commissioner of Internal Revenue