VAT Ruling No. 040-01

July 2, 2001 VAT RULING NO. 040-01 Sec. 108 (B) (4) 000-00 International Tankers Corporation No. 2868 Lamayan St., Sta. Ana, Metro Manila Attention: Manuel M . Leyson, Jr . Executive Vice President Gentlemen : This refers to your letter dated 17 April 2001 concerning your request for a confirmation of your opinion that your payment of insurance premium for the "Marine Hull Insurance" of your ocean-going vessel is subject to the zero percent (0%) value added tax (VAT), pursuant to Section 108 (B) (4) of the National Internal Revenue Code of 1997. It is represented that you are exclusively engaged in the international shipping business; that, you insured your ocean-going vessel, "M/T SHOGUN," for "marine hull insurance" through the Jardine Lloyd Thompson Insurance Brokers who, however, advised that the marine hull insurance premium thereon shall be subject to the 10% VAT, hence, your said request for ruling. In reply, please be informed that Section 108 (B) (4) of the National Internal Revenue Code of 1997 (formerly Section 102 (b) (4), old NIRC), as implemented by Section 4.102-2 (b) (4) of Revenue Regulations No. 7-95, provides that a VAT-registered person shall be entitled to the benefit of the zero percent (0%) VAT on " Services rendered to vessels engaged exclusively in international shipping ." It has also been held in VAT RULING No. 010-98 dated 10 February 1998 that ". . . the VAT zero-rated services contemplated in the above cited provision refers to services with respect to the international vessel itself such as crewing, repair, catering, and other similar arrangements . . . ." In view thereof, this Office believes and so holds that the premium charged on the marine hull insurance of your aforementioned ocean-going vessel is embraced under the above mentioned law and regulations, hence, subject to the zero percent (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. ADcEST Very truly yours, (SGD.) REN G. BAEZ Commissioner of Internal Revenue