VAT Ruling No. 027-03

May 2, 2003 VAT RULING NO. 027-03 Section 109 (c) VAT Ruling No. 022-2002; 094-97 Sytengco Enterprises Corporation No. 10 Resthaven Street, SFDM Quezon City Attention: Mr. Renan M. Del Rosario Senior Vice President Gentlemen : This refers to your letter dated November 26, 2002 requesting for a clarification to the effect that Garlic Powder and Onion Powder used as spices are exempt from the Value Added Tax (VAT) under Section 109(c) of the 1997 Tax Code based on Vat Ruling No. 022-2002 dated April 3, 2002. It is represented that Vat Ruling No. 022-2002 dated April 3, 2002 on the basis of Vat Ruling No. 094-97 was issued by this Office exempting from the Value Added Tax Chili Powder, Onion Powder and Garlic Powder; that the ATRIG Application was put "on hold " because of the open declaration that 0.0005% of antioxidant has been incorporated in the Garlic Powder and Onion Powder; and that a Memorandum from the Assistant Commissioner of the Large Taxpayers Service was issued to reconsider the earlier issued ruling on the exemption from the Value Added Tax of the above items on the basis of the findings of the Chief, BIR Laboratory Section. In reply, please be informed that gas per laboratory analysis conducted by the Laboratory Section of the Bureau of Internal Revenue, a preservative is any agent that prolongs the useful life of a material and an example of a preservative is an antioxidant. When this antioxidants are added to food, they are considered as food preservatives. Section 109(c) of the Tax Code of 1997 expressly states the simple process of preparation or preservation of food products for the market in order for them (food products) to be considered in their original state. These processes include freezing, drying, salting, broiling, roasting, smoking or stripping. It is the opinion of this Office, as it hereby holds that the addition of antioxidants to food/food products is not considered as a simple process of preservation in relation to Section 109(c) of the Tax Code of 1997. Garlic Powder and Onion Powder should be subject to the Value Added Tax. This ruling partially revokes Vat Ruling No. 094-97 dated April 3, 2002 and Vat Ruling No. 022-2002 dated April 3, 2002. Very truly yours, Commissioner of Internal Revenue By: (SGD.) JOSE MARIO C. BUAG Deputy Commissioner Legal Inspection Group