VAT Ruling No. 042-97

May 15, 1997 VAT RULING NO. 042-97 Semirara Coal Corporation 7th Floor, Quad Alpha Centrum 125 Pioneer St. Mandaluyong City Attention: Virgilio R . Francisco Assistant Vice-President Gentlemen : This refers to your letter dated February 26, 1997 which was indorsed to this Office by the Department of Finance relative to your request for confirmation of your opinion that coal operating contractors under Presidential Decree No. 972 are exempt from the payment of the 10% value added tax on their importation of equipment, machinery and spare parts for use in its mining operations. It is represented that Semirara Coal Corporation is a Coal Operating Contract ("COC") holder of the government and is the largest producer of coal in the Philippines. On the basis of the amendatory provisions of Republic Act No. 8241, it now seeks exemption from the value added tax on its importation of equipment, machinery and spare parts for use in its mining operators in accordance with Section 16 (b) of Presidential Decree No. 972 (otherwise known as the "Coal Development Act of 1976") which provides, to wit: "SEC. 16. Incentives to Operators . The provision of any law to the contrary notwithstanding, a contract executed under this decree may provide that the operator shall have the following incentives: xxx xxx xxx (b) Exemption from payment of tariff duties and compensating tax on importation of machinery for the coal operations. . ." In reply, please be informed that in accordance with Section 103 of the Tax Code, as amended by Republic Act No. 8241, which provides as follows: SEC. 103. Exempt Transactions . the following shall be exempt from the Value-Added Tax: xxx xxx xxx (q) Transactions which are exempt under international agreements to which the Philippines is signatory or under special laws, except those under Presidential Decree Nos. 66, 529, and 1590." the exemption from the value added tax with respect to coal operators was restored. Its must be noted that Republic Act No. 7716 had previously excluded Presidential Decree No. 972 from the list of VAT exempt transactions when it then provided, to wit: xxx xxx xxx "(q) Transactions which are exempt under special laws, except those granted under Presidential Decree Nos. 66, 529, 972 , 1491, and 1590, and non-electric cooperatives under Republic Act No. 6938, or international agreements to which the Philippines is a signatory". In view of the deletion made by Republic Act No. 8241 with respect to PD 972, the importation of equipment, machinery and spare parts by coal operators for use in its mining operations is now exempt from value added tax. This ruling is being issued to Semirara Coal Corporation based on 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. aisadc Very truly yours, LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue