VAT Ruling No. 047-01

July 16, 2001 VAT RULING NO. 047-01 RMC 074-99 Sec. 4.108-1 Sonnets Food and Catering Services MEPZ Lapu-Lapu City Attention: John Douglas Torrefiel Proprietor Gentlemen : This refers to your letter dated November 24, 2000 requesting information on whether there is a need for you to apply for zero-rated (0%) VAT on your sale of services. It is represented that Sonnets Food and Catering Services is a VAT-registered single proprietorship with address at Unitex (Phils.) MEPZ, Lapu-Lapu City; that your primary business is servicing LEAR Corporation located at MEPZ by providing meals to the employees of the latter; that LEAR Corporation (formerly known as United Technologies Automotive (Phils.), Inc.) is a PEZA-registered company which is subject to the 5% tax on gross income earned, in lieu of all taxes, except real property taxes, under R.A. No. 7916 as amended by R.A. No. 8748; that as per contract with LEAR Corporation, you will provide meals to its employees at P18.00 per meal per employee; that the P18.00 contract price was computed by LEAR Corporation by considering the cost or price of meat, vegetables, labor and overhead and a 15% mark-up, but excluding 10% VAT; that the procedure of billing and collection is performed directly by LEAR and SONNETS and does not progress from LEAR to EMPLOYEES to SONNETS; that weekly billings are based on the daily projected head count of department managers; however, in case of discrepancies between the projected and the actual head count, billing is always based on the larger count and that for such sales, SONNETS issues official receipts to LEAR Corporation stamped "ZERO-RATED SALES". In reply, please be informed that Revenue Memorandum Circular No. 074-99 provides that . . . any sale of goods, property or services made by a VAT-registered supplier from the Customs Territory to any registered enterprise operating in the ecozone, regardless of the latter's PEZA registration, is actually qualified and thus legally entitled to the zero percent 0% VAT. Accordingly, all sale of goods or property to such enterprise made by a VAT-registered supplier from the Customs Territory shall be treated subject to 0% VAT, pursuant to Sec. 106(A)(2)(a)(5). NIRC, in relation to ART 77(2) of the Omnibus Investment Code, while all sales of services to the said enterprises made by VAT-registered suppliers from the Customs Territory shall be treated effectively subject to the 0% VAT, pursuant to Section 108(B)(3), NIRC, in relation to the provisions of R.A. 7916 and the "Cross Border Doctrine" of the VAT system. "This Circular shall serve as a sufficient basis to entitle such supplier of goods, property or services to the benefit of the zero percent (0%) VAT for sales made to the aforementioned ECOZONE enterprises and shall serve as sufficient compliance to the requirement for prior approval of zero-rating imposed by Revenue Regulations No. 7-95 effective as the date of issuance of this Circular." EIDaAH Clearly, Sonnets Food and Catering Services is not required to secure any prior permit from this Office in order to be entitled to the benefit of the zero percent VAT in respect of its sale of services to LEAR Corporation. It is understood however, that Sonnets Food and Catering Services should use and issue only a duly registered VAT invoice on which the word "zero-rated" is imprinted thereon, to cover the aforesaid zero-rated sales, pursuant to the provisions of Sec. 4.108-1 of Revenue Regulations No. 7-95, otherwise known as the Consolidated Value-Added Tax Regulations. 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. Very truly yours, Commissioner of Internal Revenue By: (SGD.) EDMUNDO P. GUEVARA Deputy Commissioner Legal and Inspection Group