VAT Ruling No. 032-93

May 18, 1993 VAT RULING NO. 032-93 Section 102 (a) 103 (u) 085-92 203-90 032-1993 NCH Philippines, Inc. Between Kms. 19 & 20 Northside Ortigas Ave. Ext. Cainta, Rizal Attention: Mr . Ernesto M . Gutierrez Operations Manager Gentlemen : This has reference to your letter dated October 22, 1992 stating that your company is engaged in the manufacture and sales of specialty maintenance chemicals which include cleaners and degreases, water treatment chemicals for boilers and cooling systems, lubricants, specialty castings, rust and scale removers and other related products. As represented, some of your customers are EPZA-registered companies and BOI-registered exporters. Prior to the issuance of Revenue Memorandum Order (RMO) No. 22, 3, sales to these firms were considered as zero-rated transactions. The RMO is quite clear where it states that BOI-registered companies are not at all affected by said memorandum and their zero-rating status will remain in effect without interruption. Your problem is with your EPZA-registered customers with previous zero-rating registrations. Some of them would want you to continue billing them under zero-rated status while some of them have informed you that there is a new VAT ruling (VAT Ruling No. 085-92) that applies to them which make them VAT-exempt for materials bought and which are used in manufacturing and do not form part of the finished goods eventually exported. Based on the foregoing, you now request for a clarificatory ruling on whether or not sales of materials (which will not form part of the finished goods to be exported) to EPZA-registered firms are either subject to VAT, VAT-exempt or zero-rated. In reply, please be informed that RMO No. 22-92 explicitly states that only the sale to EPZA-registered firms of raw materials which shall form part of the finished goods eventually exported can qualify for effective zero-rating. On the other hand, sale of goods (e.g. materials which will not form part of the finished goods to be exported) to EPZA-registered firms are exempt from VAT pursuant to Section 103(u) of the Tax Code, in relation to Article 77(1) of the Omnibus Investments Code of 1987 (E.O. No. 226). Furthermore, sale of services to EPZA-registered firms shall be subject to the 10% VAT in accordance with Section 102(a) of the Tax Code. Please be guided accordingly. Very truly yours, VICTOR A. DEOFERIO, JR. Deputy Commissioner Officer-in-Charge