Solid Shipping Lines Corporation (SOLID)

July 16, 2001 VAT RULING NO. 046-01 Sec. 108 (A) 062-98 J . P . Tolentino & Co . , CPA's #16 Pelota St., St. Francis Village Cainta, Rizal Subject: Solid Shipping Lines Corporation (SOLID) Gentlemen : This refers to your letter dated December 23, 1998 concerning your request for and in behalf of your client, Solid Shipping Lines Corporation, for information whether its transshipment services to NYK Shipping Lines, a foreign shipping company, may qualify for the zero percent (0%) value-added tax (VAT). In reply, please be informed that in VAT Ruling No. 062-98 dated December 15, 1998, it was held: " Accordingly, the onus of taxation under our VAT System is in that country where goods, property or services are destined, used or consumed. This is the reason why under our VAT Law, goods, property or services destined to, used or consumed in the Philippines are subject to the 10% VAT whereas those destined, used or consumed abroad are subject to zero percent (0%) VAT. Thus, unless otherwise expressly provided for by law, sale of services, such as those rendered to vessels engaged exclusively in international shipping business, may be treated qualified for the zero percent VAT provided the use or benefit derived from such services crosses the Philippine territory in accordance with the Cross Border Doctrine, which is the underlying principle of our VAT System. For this reason, this Office is amenable to apply the zero percent (0%) VAT on the transshipment services rendered by the aforesaid domestic carriers to the aforementioned international carriers with respect to transshipment of goods or cargoes from a Philippine port to a foreign port of entry (i.e., zero percent (0%) VAT only for outbound transshipment of goods or cargoes). Conversely, Inbound Transshipment of goods or cargoes shall be subject to the 10% VAT, pursuant to Section 108(A) of the Tax Code of 1997 ." Accordingly, only outbound transshipment of goods or cargoes shall be subject to the benefit of zero-rating for VAT purposes. 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. SEHTAC Very truly yours, (SGD.) EDMUNDO P. GUEVARA Commissioner of Internal Revenue