VAT Ruling No. 030-01

May 29, 2001 VAT RULING NO. 030-01 RMC 74-99 010-00 Vicente E . Reyes and Associates 22 Tirad Pass, Quezon City P.O. Box 2939 Attention: Mr . Amado P . Galang Partner Gentlemen : This refers to your letter dated May 22, 2000, in behalf of your client, Mercury Drug Corporation (MDC),with office address at No. 7 Mercury Avenue corner E. Rodriguez, Jr., Quezon City requesting for confirmation of your opinion that your client's sales to PEZA-registered enterprises are subject to ten percent (10%) value-added tax and are not covered by Revenue Memorandum Circular No. 74-99 for the following reasons, to wit: 1. RMC 74-99 provides for a zero percent (0%) VAT if the buyer is a PEZA-registered enterprise which is subject to the 5% special tax regime; 2. MDC is not a PEZA-registered enterprise; and 3. MDC is not considered a supplier from the customs territory. In reply, please be informed that Section 3(3) of RMC 74-99 provides that "any sale of goods . . . made by a VAT-registered supplier from the Customs Territory to any registered enterprise operating in the ecozone, regardless of the class or type of the latter's PEZA registration , is actually qualified and thus legally entitled to the zero percent (0%) VAT." Furthermore, RMC 74-99 "shall serve as a sufficient basis to entitle such supplier of goods . . . to the benefit of the zero percent (0%) VAT for sales made to the afore-mentioned ecozone enterprises and shall serve as sufficient compliance to the requirement for prior approval of zero-rating imposed by Revenue Regulations No. 7-95." (Emphasis supplied.) (See VAT Review Committee Ruling No. 010-00 dated February 25, 2000) Section 2 of RMC 74-99 defines the term "Customs Territory" as the national territory of the Philippines outside of the proclaimed boundaries of the ECOZONES, except those areas specifically declared by other laws and/or presidential proclamations to have the status of special economic zones and/or free ports. Thus, if MDC is VAT-registered, its VATable sales to PEZA-registered enterprises operating within the Ecozone shall be treated as zero-rated (0%) VAT transactions under Sec. 106(A)(2)(a)(5) of the Tax Code of 1997, in relation to Article 77(2) of the Omnibus Investments Code. However, MDC should imprint on its duly registered VAT invoice the word "zero-rated" covering such zero-rated sales pursuant to Section 4. 108-1 of Revenue Regulations 7-95. 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, Commissioner of Internal Revenue By: (SGD.) EDMUNDO P. GUEVARA Deputy Commissioner Legal and Inspection Group