VAT Ruling No. 022-03

February 27, 2003 VAT RULING NO. 022-03 Sec. 109 (k) 061-97 Leyte Agri-Ventures Corporation Barangay 69, Anibong District Tacloban, Leyte Attention: Atty. Inaki Larrazabal, Jr. President Gentlemen : This refers to your letter dated November 15, 2002 requesting for a ruling that fees paid to you, as toll dressing contractor, is exempt from the 10% value-added tax (VAT). cDCaTS It is represented that you are a toll dressing contractor of Swift Foods, Inc. under which you will dress the chicken of Swift Foods, Inc.; that per your understanding, your services are VAT exempt, since your services do not change the original state of the chicken and your contract does not include VAT, as part of the charges for said services; and that you relied on VAT Ruling No. 061-97 and BIR Ruling No. 028-00 that toll dressing comes within the purview of services of agricultural contract growers which are exempt from value-added tax. In reply thereto, please be informed that this Office had already the occasion to rule on the matter when it said in VAT Ruling No. 061-97 dated October 10, 1997, reiterating BIR Ruling No. 127-95 dated August 25, 1995, that ". . . agricultural contract growers, referring to those persons producing for others poultry, livestock or other agricultural and marine food products in their original state, are exempt from VAT. In this case, contract growing described as receiving day-old chicken/broilers, sorting, fumigating, sexing of day-old broilers and growing into marketable chicken, and toll dressing described as a package of services including receiving of live broilers from contract growers, weighing, killing, dressing, delivery, cut-ups and packing come within the purview of services of agricultural contract growers which are exempt from VAT pursuant to Section 103(k) of the Tax Code, as amended. "In view of the foregoing; we hereby confirm . . . that contract growing and toll dressing by agricultural contract growers are exempt from VAT." Considering that you are on all fours with the above-cited cases, this Office holds that fees paid to you by Swift Foods, Inc. for the toll dressing services shall be exempt from value-added tax pursuant to Section 109(k) of the Tax Code of 1997. 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. Very truly yours, (SGD.) JOSE MARIO C. BUAG Deputy Commissioner Legal & Inspection Group