VAT Ruling No. 024-98

September 1, 1998 VAT RULING NO. 024-98 Sec. 109 (c)-000-024-98 Philgro Incorporated 39 Twin Hills Street, Rolling Hills, New Manila Quezon City Attention: Mr . Brendan M . Davies President Gentlemen : This refers to your letter dated 1 September 1998 concerning your request for information whether your sale of live dairy cows to the National Dairy Authority (NDA), a government agency, is subject to four percent (4%) withholding tax. It is represented that on 28 August 1998, you sold 301 heads of live dairy cows (AFS A3 Heifers); that the said government agency (buyer) is withholding from you a total of four percent (4%) as alleged contractor's tax or value added tax. In reply, please be informed that the contractor's tax law had been repealed and replaced by the Value Added Tax Law, effective January 1, 1988, pursuant to National Internal Revenue Code (NIRC), as amended by Executive Order No. 273. Under Section 109(c) of the NIRC, as amended by Republic Act No. 8424 "sale or importation of . . . livestock . . . of a kind generally used as, or yielding or producing foods for human consumption; and breeding stock and genetic materials therefor" are exempted from value added tax. Accordingly, such sale transaction is also exempted from the three percent (3%) creditable VAT withholding, notwithstanding that the buyer is a government agency. However, pursuant Sec. 2.57.2, Subsection (N) of the Revenue Regulations No. 2-98, otherwise known as the "Creditable Withholding Tax on Certain Income Payments", the said sale transaction is subject to one percent (1%) creditable withholding tax, as follows: "(N) Income payments by government Income payments, except any single purchase which is P10,000 and below, which are made by a government office, national or local, including government-owned or controlled corporation, on their purchases of goods from local supplies - One percent (1%)." Please be guided accordingly. Very truly yours, (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner Legal and Enforcement Group