VAT Ruling No. 054-00

November 20, 2000 VAT RULING NO. 054-00 RMC 74-99 000-00 Laya Mananghaya & Company 22nd Floor Antel 1000 Corporate Centre 139 Valero St., Salcedo Village Makati City 1227 Gentlemen : This refers to your letter dated 29 May 2000, requesting in behalf Of your client, RS COMPONENTS LIMITED PHILIPPINE BRANCH (RS Components, for short ), for a confirmation that its sale of goods to (a) various PEZA-registered customers operating inside the Ecozone; and (b) BOI-registered manufacturers-exporters with 100% export sales is considered VAT zero-rated and that to enjoy the benefit of the zero percent VAT, no prior BIR permit is required . It is represented that RS Components is the Philippine branch of a foreign corporation organized and existing under the laws of the United Kingdom (UK); that it is duly licensed to do business in the Philippines; that it is a VAT-registered person; and that it supplies goods to various PEZA-registered enterprises and to BOI-registered manufacturers-exporters whose export sales are 100% exported. In reply, please be informed as follows: 1. Sale to PEZA-registered customers . Revenue Memorandum Circular No. 74-99 dated 15 October 1999, 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 of the date of issuance of this Circular. " Clearly, your client, as a VAT-registered person, 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 goods to the aforesaid PEZA-registered buyers. It is understood, however, that your client shall use and issue only a duly registered VAT invoice on which the word "zero rated" is pre-printed thereon , to cover the said 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. 2. Sale of BOI-registered 100% manufacturer-exporter . Section 2 of Revenue Memorandum Order No. 9-2000 dated 02 February 2000, provides: "The rationale of RMC 74-99 may also find application to sales made by VAT-registered suppliers to BOI-registered enterprises whose manufactured products are 100% exported to foreign countries and therefore said sales can likewise be accorded automatic zero-rating treatment " For as long as your client complies with the requirements under RMO No. 9-2000, it is equally clear that your said client is not required to secure from this Office any prior permit in order to be entitled to the benefit of the zero percent (0%) VAT in respect to its sale of goods to the aforesaid BOI-registered enterprises. It is understood that your client shall use and issue only zero-rated VAT invoice in respect of such sales, pursuant to the provisions of Section 4.108-1 of Revenue Regulations No. 7-95. Very truly yours, (SGD.) DAKILA B. FONACIER Commissioner of Internal Revenue