VAT Ruling No. 043-93

December 7, 1993 VAT RULING NO. 043-93 Section 100 (a) (1)-000-00-043-93 Greater Manila International Marketing, Inc. (Jeepney Shopping Center) 1913 Taft Avenue Pasay City, Metro Manila Attention: Mr . Jerry T . Limpe President S i r s : This refers to your letters dated April 1, 1991 and April 6, 1992 stating that Greater Manila International Marketing, Inc. doing business under the trade name Jeepney Shopping Center, is engaged in the sale of locally manufactured handicrafts to foreign tourists; and on a limited scale, you also export handicraft items to foreign countries; that the payments you receive on the sale to foreign tourists are in foreign currency which you subsequently exchange to pesos through the Philippine Bank of Communications (a local bank) and the transactions are reported to the Central Bank; that it is your opinion that the process of exchanging the foreign currency receipts to pesos thru a commercial bank is deemed to have complied with the provisions of Executive Order No. 273 and Revenue Regulations No. 5-87 on the remittance of foreign currency thru the banking system and therefore, subject to zero rate; and that to support your opinion, you have attached a letter from Central Bank dated June 23, 1992, that under Section 1(d) of Central Bank Circular No. 1318, establishments duly accredited by the Department of Tourism as tourism-oriented establishments are required to sell the foreign exchange earned, acquired or received by them in connection with their business operations to Authorized Agent Banks within three (3) business days from their receipt of such foreign exchange in the Philippines; and that a credit advice or certification evidencing the sale/conversion for pesos of these receipts with the bank within the three (3) day reglementary period would be the appropriate document to present to the BIR for purposes of securing VAT exemption on such sales. Based on the foregoing, you now seek clarification on whether your sale to foreign tourist in foreign currency which are subsequently exchanged for pesos and properly reported to the Central Bank amounts to a foreign currency denominated sale that will qualify for zero-rating. In reply, please be informed that your sale of locally manufactured handicrafts to foreign tourists which are paid for in acceptable foreign currency is an aspect of foreign currency denominated sales since the foreign currency proceeds are subsequently converted to pesos pursuant to Section 1(d) of Central Bank Circular No. 1318 by virtue of your accreditation as a tourism-oriented establishment. Such being the case, we hereby confirm your opinion that both your active export and foreign-currency denominated sales are zero-rated pursuant to Section 100(a)(1) of the Tax Code. However, only that portion of foreign currency receipts which are converted to pesos and reported to the Central Bank will qualify for zero-rating. LibLex Very truly yours, LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue