VAT Ruling No. 029-04

October 28, 2004 VAT RULING NO. 029-04 Secs. 112, 237, R.R. 7-95, RMC 61-03 VAT Ruling No. 014-96 Jollibee Foods Corporation 5/F Jollibee Plaza 10 Emerald Ave., Ortigas Center Pasig City, Metro Manila Attention: Ms. Annie S. Masancay Vice President Comptrollership and Tax Management Gentlemen : This refers to your letter dated July 12, 2004 for and in behalf of the Jollibee Group of Companies composed of the following: Name of Company TIN Address Jollibee Foods Corporation 000-388-771-000 5th Flr., Jollibee Plaza Bldg. Emerald Ave., Ortigas Center Pasig City Chowking Food Corporation 000-333-173-000 6th Flr., Jollibee Center Bldg. San Miguel Ave, Ortigas Center, Pasig City Greenwich Pizza Corporation 003-934-003-000 4th Flr., Jollibee Center Bldg. San Miguel Avenue, Ortigas Center, Pasig City Zenith Foods Corporation 218-664-404-000 Integrity Avenue, Carmelray Industrial Park Canlubang, Laguna Vismin Foods Corporation 000-065-481-000 G. Ouano St., Bo. Alang-alang, Mandaue City, Cebu Baker Fresh Foods Phils., Inc. 004-726-990-000 37B Kalinangan St. Caniogan, Pasig City requesting a special permit to 1. Allow the continuous use of your current "Invoice" format, which you have been previously granted an authority, as stated in BIR VAT Ruling No. 014-96 signed by former BIR Commissioner L. V. Chato; and 2. Grant you exemption from the requirement of Revenue Memorandum Circular No. 61-2003 to indicate the phrase " Not to be used for non-VAT/exempt sale of goods, properties or services. If issued, sales shall be a subject to 10% VAT " on your existing official receipt forms. Instead, you propose to substitute said phrase with the statement "THIS OFFICIAL RECEIPT WILL NOT BE USED TO GENERATE VAT INPUT/OUTPUT TAX" printed on the official receipt, as the transaction has been subjected to VAT through the invoice. It is represented that the above companies are organized and existing under Philippine laws; that, in addition to their regular catering business, these companies have their respective commissary operations; that pursuant to this commissary business, the above firms are engaged in the manufacture of food products and wholesale of food and non-food products which are exclusively sold to sister companies, affiliates and franchisees: that most of these transactions are subject to VAT and some are exempt therefrom; that under Revenue Regulations No. 7-95, it is provided that if a VAT-registered person is also engaged in non-VAT (exempt) transactions, it should use separate invoice/receipts for taxable and exempt transactions; that Jollibee Foods Corporation was issued BIR VAT Ruling No. 014-96 dated July 16, 1996, exempting said taxpayer from this requirement; that recently, the BIR issued Revenue Memorandum Circular No. 61-2003 dated October 6, 2003 which reiterates the requirement to use separate invoices/receipts for taxable and exempt transactions; that RMC No. 61-03 also requires the following phrase to be indicated in the VAT invoices/receipts, thus " Not to be issued for non-VAT/exempt sale of goods, properties or services. If issued, sales shall be subject to 10% VAT "; that if applied strictly to the Jollibee Group of Companies, the above requirement would result to complicated operations, voluminous transactions and files; that the use of your existing invoicing system has been proven to be very efficient to your internal and external auditing and tax reporting system; and that the Jollibee Group's franchisees, affiliates and sister companies have not abused nor misused the invoices and official receipts and, more importantly, have not claimed more input tax from the declared output tax indicated on said invoices and thus, the government's apprehension that this can and will be abused does not apply to your Group. In support of your request, you submitted copies of the following 1. Your previous letter-request for ruling dated September 9, 1994; 2. BIR VAT Review Committee Ruling No. 014-96 issued by Commissioner L. V. Chato dated July 16, 1996; 3. Sample of existing forms such as sales invoices, debit and credit memoranda; 4. Sample of proposed official receipt form; and 5. Sample of official receipt/cash invoice form of SM Supermarket which similarly adopts your invoicing pattern. In reply, please be informed that, after a careful evaluation of the issues at hand, we find your request to be meritorious. Accordingly, this Office does not object to your continuous use of your present invoice system subject to the following conditions 1. In the sales invoice, the selling prices of items subject to VAT shall be presented separately from those exempt from VAT and that the amount of the total Output Tax (Input Tax to the VAT-registered customer) shall be separately indicated. Thus, there is no need to print the phrase " Not to be issued for VAT-exempt sale of goods, properties and services. If issued sales shall be subject to ten percent (10%) VAT "; 2. That your affiliates, franchisees and sister companies, which are the customers of the commissary operations, shall be constantly reminded not to claim input tax credit more than the amounts specifically mentioned in the sales invoices; 3. To acknowledge payment for charge sales, NON-VAT official receipts shall be issued and, thus, there is no more need to indicate the phrase "This Official Receipt will not be used to generate input tax credits,"; and 4. Your use of computerized accounting system (CAS) must conform with pertinent internal revenue issuances. This ruling is issued on the basis of the foregoing representations. If upon investigation it is discovered 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 C. BUAG Deputy Commissioner Legal and Inspection Group