VAT Ruling No. 036-01

June 13, 2001 VAT RULING NO. 036-01 L & T International Group Phils . , Inc . 5/F Times Plaza Building United Nations cor. Taft Avenue Ermita, Manila Attention: Mr . Abbet R. Barce, Tax Officer Gentlemen : This refers to your letter dated, December 07, 2000, advising that your group of companies, namely (1) Advanced Fashion Inc. (AFI); Starcar Garment Enterprises, Inc. (SGEI); and (3) Jasmine Garment Corporation (JGC) are all BOI-registered enterprises; that, AFI, SGEI and JGC are also registered with the Garments and Textile Export Board (GTEB); that, their manufactured products are 100% exported to foreign countries; that, under Revenue Memorandum Order (RMO) No. 9-2000, dated February 02, 2000, sale of goods, properties or services made by a VAT-registered supplier to a BOI-registered exporter whose products are 100% exported may be entitled to the benefit of the zero percent (0%) VAT provided, however, that the Board of Investments (BOI) has certified that such buyer-manufacturer is a BOI-registered 100% exporter; that, however, the BOI refuses to issue a certification that your above group of companies are 100% exporter because the BOI and the BIR are still preparing the "guidelines" for the implementation of RMO No. 9-2000; and that in view thereof, you are requesting for the resolution of the following: "(a) Whether the BOI Certificate under RMONo.9-2000 is a ministerial requirement only and other export documents such as GTEB document may be used as basis in determining that our companies are actually exporting 100% of its products; and "(b) Whether our companies' purchases of goods, properties and services are already entitled for zero-rating for VAT purposes pursuant to the principle of-the Cross Border Doctrine of our Philippine VAT System even without the BOI Certification provided our companies are actually exporting all its products." In reply, please be informed that: (1) Section 2 of RMONo.9-2000 provides, in part: " The rationale of RMC74-99 may also find application to sales made by VAT registered suppliers to BOI-registered enterprises whose manufactured products are 100% exported to foreign countries and therefore said sales can likewise be accorded automatic zero-rating treatment ." RMC 74-99 pertains to sales made to PEZA-registered enterprises whereas RMO 9-2000 pertains to sales made to BOI-registered enterprises whose manufactured products are 100% exported to foreign countries. Thus, RMC 74-99 and RMO 9-2000 may not be enlarged to embrace other exporters, such as those registered with the GTEB. The determination of whether or not your above group of companies are BOI-registered 100% exporters rests with the Board of Investments (BOI). This is a question of facts which only the BOI may determine. Thus, in the absence of a certification from the BOI that your group of companies are BOI-registered 100% exporters, their respective VAT-registered suppliers shall not enjoy the benefit of the zero percent (0%) VAT, pursuant to the provisions of RMO 9-2000. Moreover, the guidelines for the implementation of RMO 9-2000 are already prescribed thereunder. While the BOI requested for certain clarifications on the coverage of RMO 9-2000, the same, however, do not pertain to the GTEB-registered entities. 2. The benefit of the zero percent VAT means total exemption from the payment of the 10% VAT. The doctrine is exemption from the tax is strictly construed against the claimant. Thus, it has been held in the case of Consuelo P. Borja vs. Collector of Internal Revenue: TCaSAH " Exemptions from taxation are highly disfavored in law; and he who claims exemption must be able to justify his claim by the clearest grant of organic or statute law . In other words, an exemption from the common burden cannot be permitted to exist upon vague implication (Asiatic vs. Petroleum Co. vs. Llanes, 49 Phil, 466; see also House vs. Posadas 53 Phil . , 338; Collector of Internal Revenue vs. Manila Jockey Club, Inc . , 98 Phil . , 670) ." While the "cross border doctrine" of the VAT system has been extended to PEZA and BOI-registered exporters under the aforementioned RMC 74-99 and RMO 9-2000, pursuant to and in relation with the PEZA law and the BOI law, the said doctrine, however, has not been extended to cover exporters under the GTEB law and such other laws. In view of the foregoing, this Office regrets to inform that your aforementioned request cannot be granted for lack of legal basis. Very truly yours, (SGD.) REN G. BAEZ Commissioner of Internal Revenue