VAT Ruling No. 021-03

February 26, 2003 VAT RULING NO. 021-03 108 (B) VAT Ruling No. 086-2001 Miascor GroundHandling Corporation 4th Floor, IPT 1 Building Ninoy Aquino International Airport Pasay City Attention: Mr. Fernando V. Detaunan VP/Group Controller Gentlemen : This refers to your letter dated May 6, 2002 stating that: "Our company, Miascor GroundHandling Corporation, is a domestic corporation registered with the Board of Investments (BOI) under Certificate of Registration No. 97-214 dated November 14, 1997, Based at the Ninoy Aquino International Airport, we operate as a service exporter catering to such international carriers as Air France, China Southern Airlines, Malaysian Airlines, Japan Airlines, Saudi Arabian Airlines, Gulf Air, Royal Brunei Airways, Federal Express, Continental Micronesia Airlines, Swiss International Airlines, Kuwait Airways, Pakistan International Airlines, Vietnam Airlines, Qantas Airways and Asiana Airlines. We provide ground handling services ranging from passenger and baggage check in, cargo loading and unloading, baggage consolidation/break bulking, load planning, VIP passenger assistance, baggage lost and found, and other non-routine services like ground power unit and air start unit provisioning. We bill and get paid in US Dollars. Our dollar depository account is with UCPB Paseo de Roxas Branch and our customer payments come either via wire transfer or via dollar checks. TcHCIS "Under our Concession Contract with the MIA Authority (MIAA),we are obliged to pay to MIAA 7% of our gross revenues as Concessionaires' Privilege Fee or CPF in consideration of the privilege to operate as a ground handler within the Ninoy Aquino International Airport. Given that our revenues are effectively zero-rated, may we request clarification/ruling from the good commissioner on whether or not the CPF that we remit to MIAA on a monthly basis could be zero-rated also." In reply, please be informed that Section 108(B) of the 1997 Tax Code, specifically enumerates the transactions subject to zero-percent (0%) VAT, to wit: "(1) Processing, manufacturing or repacking goods for other persons doing business outside the Philippines which goods are subsequently exported, where the services are paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP) "(2) Services other than those mentioned in the preceding paragraph, the consideration for which is paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP); "(3) Services rendered to persons or entities whose exemption under special laws or international agreements to which the Philippines is a signatory effectively subjects the supply of such services to zero percent (0%) rate; "(4) Services rendered to vessels engaged exclusively in international shipping; and "(5) Services performed by subcontractors and/or contractors in processing, converting, or manufacturing goods for an enterprise whose export sales exceed seventy percent (70%) of total annual production. Considering that Miascor Ground Handling Corporation does not enjoy any tax exemption under special law, it cannot avail of VAT zero-rating under the aforequoted provision. Hence, Concessionaires' Privilege of Miascor Ground Handling Corporation at MIAA is subject to 10% VAT pursuant to Sec. 105 in connection with Sec. 108 both of the Tax Code of 1997. Accordingly, your opinion that the Concessionaires' Privilege Fee is entitled to the benefit of zero-percent VAT cannot be sustained for lack of legal basis. Thus, the aforestated fee which you remit to MIAA on a monthly basis is subject to the 10% value-added tax. This ruling is being issued on the basis of the foregoing representations. However, if upon investigation, it will be ascertained that the facts are different, then this ruling shall be considered null and void. Very truly yours, Commissioner of Internal Revenue By: (SGD.) JOSE MARIO G. BUAG Deputy Commissioner Legal and Inspection Group