VAT Ruling No. 030-90

February 14, 1990 VAT RULING NO. 030-90 Datagraphics, Inc. Doa Virginia Bldg. Orense Cor. del Carmen St. Guadalupe, Makati Metro Manila Attention: Mr . Antonio M . Inocentes Vice President-Finance S i r s : This refers to your application for a zero rated sale of goods and services to the following BOI-registered export producers; 1) PR Industries; 2) Euro Class Manufacturing Corp.; and 3) Eds Manufacturing, Inc. In reply, please be informed that your sale of raw materials to the aforementioned firms is effectively zero-rated, provided that the following conditions under Section 2(a) of Revenue Regulations No. 2-88 are complied with: LLphil (1) The seller shall file an application with BIR, ATTN: VAT DIVISION, applying for zero-rating for each and every separate buyer, in accordance with Section 8(d) of Revenue Regulations No. 5-87. The application should be accompanied with a favorable recommendation from the Board of Investments. (2) The raw materials sold are to be used exclusively by the buyer in the manufacture, processing or repacking of his own registered export product. (3) The words "zero-rated sales" shall be prominently indicated in the sales invoice. The exporter (buyer) can no longer claim from the Bureau of Internal Revenue or any other government office tax credits on their zero-rated purchases. Your sale of services to the said firms, cannot legally qualify for zero-rated VAT under Revenue Regulations No. 2-88, amending Revenue Regulations No. 5-87, because these regulations do not allow zero rating for sale of services. However, the said regulations allow its exemption from 10% VAT subject to the following conditions: (1) The seller of service is a BOI-registered contractor engaged in the activities of processing, converting or manufacturing of goods, and (2) the buyer of service is a BOI-registered exporter of goods who exports at least 70% of its total production as favorably endorsed by the Board of Investments. (Sec. 3, Rev. Regs. 2-88) If you (as the seller) and the said firms (as the buyers) do not meet the said requisites for VAT exemption, your sale of services shall be subject to 10% VAT, pursuant to Sec. 102(a) of the Tax Code, as amended. cdt Very truly yours, JOSE U. ONG Commissioner of Internal Revenue