VAT Ruling No. 048-00

October 30, 2000 VAT RULING NO. 048-00 Secretary Vicente C . Rivera, Jr . Department of Transportation & Communications The Columbia Tower Barangay Wack-Wack, Ortigas Avenue 1555 Mandaluyong City Dear Secretary Rivera : This refers to your letter dated 12 July 2000 requesting that appropriate action be undertaken to resolve the issue on the payment of Value-Added Tax (VAT) being imposed on Grant-Aid Projects financed by Japan International Cooperation Agency (JICA). It is represented that there is an on-going project entitled " Rehabilitation of Manila Terminal Approach Radar Control (TRACON) Facility Project " under the JICA Grant Aid Program which is being implemented by the Air Transportation Office (ATO); that the project covers the rehabilitation/replacement of the existing Manila TRACON Facility comprising of Airport Surveillance Radar (ASR), Secondary Surveillance Radar (SSR) and Terminal Radar Data Processing Systems (TRDPS) and IFR console with Display System including the rehabilitation of the existing building to accommodate the TRDPS and IFR console and the construction of a new building to house the ASR/SSR equipment; that the estimated project cost is P474.021 M; that the Manila TRACON Facility provides information to Air Traffic Control to guide the departing and arriving aircraft at the Ninoy Aquino International Airport within the Terminal Maneuvering Area (TMA); that the existing system installed in 1979 has already reached its economic life and its reliability has been downgraded due to lack of spare parts and obsolescence, hence, the need for an immediate rehabilitation. However, in a letter dated 31 May 2000, Assistant Secretary Jacinto F. Ortega, Jr. of the Air Transportation Office (ATO) called the attention of DOTC concerning the issue on the payment of Value-Added Tax (VAT) being imposed on Grant-Assisted Projects; that the said issue was raised by ATO-JICA Expert working for the TRACON project; that ATO was informed that if the VAT problem is not resolved, the said issue may adversely affect the approval of the funding assistance for the project by the Government of Japan. EaICAD In reply, please be advised that the VAT issue on Japanese Grant-Aid Projects has been resolved by this Office in VAT Committee Review Ruling No. 021-00 dated June 9, 2000 issued to the Embassy of Japan. A copy of said ruling is enclosed for your ready reference. The Embassy is in full accord with the said ruling which was followed up by a consultation meeting on June 23, 2000 attended by representatives from the Japanese Embassy, NEDA, DOF, DBM, DILG and the BIR during which a five-point understanding on issues related to Grant-Aid Project was reached. This is outlined in a letter to the Ambassador of Japan dated 11 July 2000 by the Deputy Director General of NEDA, a copy of which is likewise enclosed for your own reference. Please be guided accordingly. Very truly yours, (SGD.) DAKILA B. FONACIER Undersecretary of Finance Commissioner of Internal Revenue