VAT Ruling No. 049-90

February 20, 1990 VAT RULING NO. 049-90 Consolidated Plywood Industries, Inc. Suite 202 Cityland Condominium III Herrera Street corner Esteban Legaspi Village, Makati, MM Attention: Mr . Henry C . Wee President S i r s : This refers to your letter dated May 22, 1989 requesting a ruling on the following questions: 1. Our company is presently undertaking the repair of our administrative building. Is the lumber (produced in our own plant) being used in the repair of the said building considered a "deemed sale" transaction? llcd 2. In order to meet our export requirements, our company has entered into a milling contract with another sawmill to process some of our logs. To settle the payment of the milling fee, we use lumber to pay for the milling charges. Is the delivery of the lumber to pay for the milling fee considered a "deemed sale" transaction? 3. Our company is contemplating to import logs which will be sawn into finished products in our sawmill. The said finished products will all be exported. Is the importation of logs subject to VAT? In reply, please be informed as follows: a. The lumber of your own manufacture and used to repair your company's administration building is not embraced by the "deemed sale" transaction under the provisions of Sec. 100(b)(1), NIRC, as implemented by Sec. 4(a), Rev. Regs. No. 5-87. Under the law, to be, considered a "deemed sale" transaction, the "transfer, use or consumption of goods " by the person himself must be " not in the course of business ". Since the Company's use and consumption thereof is in the course of its business, (i.e., to repair its administration building), the said usage and consumption is not constituted as a deemed sale transaction of the Company, hence, not subject to the 10% VAT. b. Your payment of the said milling fee, made in the form of lumber delivered to your creditor, is a deemed sale transaction under Sec. 100(b)(2)(B), NIRC, as implemented by Sec. 4(c), Rev. Reg. No. 5-87, hence, subject to 10% VAT, viz.: "Distribution or transfer" of goods "to creditors in payment of debt" (ibid) c. Your importation of logs is not exempted but rather subject to 10% VAT, pursuant to Sec. 101, NIRC, notwithstanding that you intend to manufacture the same into sawn lumber which shall be exported 100%. Importation of logs is not embraced by the VAT exemption provision under Section 103(a) of the same Code (NIRC). LibLex Very truly yours, JOSE U. ONG Commissioner of Internal Revenue