VAT Ruling No. 040-02

July 22, 2002 VAT RULING NO. 040-02 Sec. 110 (A), 112, RR 7-95, RMO 9-2000 000-00 Philex Mining Corporation 27 Brixton Street Pasig City Attention: Mr. Alfredo A. Figueras Senior Vice-President & Treasurer S i r : This refers to your letter dated January 31, 2002, requesting for a ruling on whether or not a Value-Added Tax (VAT)-registered, BOI-registered manufacturer/producer, (whose products are 100% exported) is entitled to claim reimbursement of the VAT input taxes it has paid on local purchases from suppliers, which do not comply with some of the conditions prescribed in Revenue Memorandum Order No. 9-2000, such as: a. VAT-registered suppliers that offer only fixed selling prices inclusive of VAT, and issue therefor VAT invoices without the words "zero-rated" stamped thereon; and b. Other non-complying VAT-registered service/goods provider telecommunication companies, restaurants, hotels and other smaller suppliers. In reply, please be informed that RMO 9-2000 simply aims to relieve BOI-registered manufacturers/producers (whose products are 100% exported) that are VAT-registered, from the tedious processes of either prior approval of the application for effectively zero-rated VAT as mandated by Sec. 4.107-1(d) of RR 7-95, or claiming tax refunds or credits of input taxes under Sec. 112 of the Tax Code of 1997, regarding their purchases of goods, properties or services from VAT-registered suppliers. It does not in any way preempt their rights to claim tax refunds or credits for input taxes pursuant to Sec. 112, nor to apply and obtain prior approval of effectively zero-rated VAT under Sections 106(A)(2)(c) and 108(B)(3), all under the Tax Code of 1997. Therefore, you may continue to apply for a tax refund or credit for your unclaimed input taxes on purchases not covered by RMO 9-2000, in conformity with Sec. 112 of the Tax Code of 1997. However, RMO No. 9-2000 does not in any way grant new tax incentives or exemptions. To claim the privilege of automatic VAT zero-rating thereunder, the said BOI-registered entity must be able to prove that it is, in the first place, qualified to claim the input tax arising from such purchases. One of the requirements is stated in Sec. 110(A) of the Tax Code of 1997, which defines the term input tax as the "VAT due from or paid by a VAT-registered person in the course of his trade or business . . ." (Emphasis supplied.) Hence, the local purchases of goods and services must have been made in the course of the trade or business of a BOI-registered manufacturer/producer, (whose products are 100% exported) that are VAT-registered, to qualify for automatic VAT zero-rating under RMO 9-2001; otherwise, the entity's VATable purchases shall be subject to VAT but the entity cannot claim the same as input tax. This ruling is being issued based on the foregoing facts as represented. If, upon investigation, it will be discovered that the facts are different then this ruling shall be considered null and void. Very truly yours, (SGD.) REN G. BAEZ Commissioner of Internal Revenue