VAT Ruling No. 047-89

March 2, 1989 VAT RULING NO. 047-89 A de Vera Trading & Manufacturing Corp. 4th Floor, Vernida Corp. Amorsolo Street, Legaspi Village Makati, Metro Manila Attention: Mr . John Aguilar Internal Auditor S i r s : This refers to your letter dated February 17, 1989 stating that your company is a VAT registered corporation engaged in various steel and metal fabrication/ construction of which trade includes the supply of labor, materials, material testing, installation and other technical and incidental aspects as required in the drawing and designs of your client. It is further represented that two of your clients PHILPHOS and PASAR both EPZA registered enterprises contend that by virtue of VAT Ruling No. 271-88 in relation to Article 77(2) of Executive Order 226 (Omnibus Investment Code of 1987), your sale of machineries, equipment and spare parts to them, is considered an export sale and is subject to zero-rate even if they form part of your contract price. On this basis, the said entities refuse to acknowledge the 10% VAT that your include in your contract billing. You now request a ruling if such transaction can be classified as a zero-rated export sale. In reply, please be informed that under your contracting service wherein you supply both labor and materials, you are subject to 10% VAT on the total gross receipts which "means the total amount of money or its equivalent representing the contract price, compensation or service fee, including the amount charges for materials supplied with the service and deposits or advance payments actually or constructively received during the taxable quarter for the services performed or to be performed for another person "[Section 102 of the Tax Code as amended as implemented by Section 2(m) of Revenue Regulations No. 5-87]. cdta However, said transaction will not qualify for zero-rating because it is only the sale of equipment and spare parts to an EPZA registered firm (and not the sale of service) that can be zero-rated under Article 77(2) of Executive Order 226 (Omnibus Investment Code of 1987) in relation of Section 100 (a) (1) of the Tax Code as amended. Very truly yours, VICTOR A. DEOFERIO, JR. Deputy Commissioner