VAT Ruling No. 035-03

August 15, 2003 VAT RULING NO. 035-03 Sec. 112 000-00 Jaguar Cars, Inc. ENZO Bldg., Ground Floor 399 Sen. Gil Puyat Avenue Makati City Attention: Mr. Raul A. Panotes Import Manager Gentlemen : This refers to your letter, dated November 28, 2001, concerning your request for a ruling as to whether or not your proposed sale of an automobile to SHINNING STAR APPAREL MFG. COMPANY (SHINNING, for short) is entitled to the benefit of the zero percent value-added tax (0% VAT) on the ground that the buyer, SHINNING is an "export-oriented" enterprise; that the said automobile shall be used in its export business; and that, as an exporter, its export sales are entitled to the benefit of the 0% VAT. In reply, please be informed that the principle underlying the 0% VAT is the policy to refund to the VAT-registered person all input taxes attributable to his VAT zero-rated sales. 1 Thus, in general, SHINNING may be entitled to a refund of all its input taxes attributable to its export sales. 2 However, there are exceptions to recognition of input tax credit on purchases from VAT suppliers, one of which is the purchase or importation of an automobile. While the sale of an automobile by a VAT-registered supplier is subject to the 10% VAT, 3 and although, in general, the 10% is passed on to purchasers as part of the VAT-registered supplier's invoice billing, the 10% VAT on sale of automobile is an exception because Section 110(A)(1)(a)(v), NIRC of 1997, expressly provides that no input tax credit shall be allowed to the purchaser on his purchase of " automobiles , aircraft and yachts." Since the 10% VAT on SHINNING's proposed purchase of the said automobile is not embraced under the aforesaid underlying principle, there is no legal basis to extend thereto the benefit of the 0% VAT. 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. aCHcIE Very truly yours, (SGD.) GUILLERMO L. PARAYNO, JR. Commissioner of Internal Revenue Footnotes 1. See Sec. 112(A), NIRC of 1997. 2. Sec. 106(A)(2)(a), in relation to Sec. 112(A), NIRC of 1997. 3. Sec. 106, id .