VAT Ruling No. 059-99

May 17, 1999 VAT RULING NO. 059-99 Sec. 106 (a) (2) 000-00 059-99 CJH Development Corporation Camp John Hay, Baguio City Attention: Mr . Frederico S . Alquiros Chief Operating Officer Gentlemen : This refers to your letter dated April 12, 1999 requesting for the VAT-exemption of your purchase order with Philhino Sales Corporation of one (1) unit Suzuki Vitara Plus by virtue of Section 10, Chapter 4 of the Implementing Rules and Regulations of the John Hay Special Economic Zone which provides that "purchases of raw materials, capital goods, equipment and services by JHSEZ enterprises from the customs territory shall be effectively zero-rated for VAT purposes". In reply, please be advised that although merchandise or goods sold to JHSEZ enterprises may qualify for zero-rating for being considered export sale under Article 106(A)(2)(a)(5) of the Tax Code of 1997, still the term 'Merchandise or Goods' is qualified to refer only to raw materials, supplies, equipment, machineries, spare parts, packaging materials or wares of every description to be used in connection with the registered activity of an ECOZONE or SBF enterprise . Revenue Memorandum Circular No. 25-99 dated March 18, 1999 clarified that such merchandise or goods are somehow utilized in the production activity of a registered enterprise and that cars or automobiles could not possibly be embraced within the classification of such goods or merchandise entitled to the benefit of tax exemption. Hence, only specialized vehicles and other specialized transportation equipment may be allowed to be imported free from duties and taxes by ECOZONE and SBF Enterprises established pursuant to RA No. 7227 and 7916 and that ordinary commercial vehicles which are locally purchased necessarily includes all component duties and taxes, such as the Value-Added Tax. We therefore confirm that your purchase of one (1) unit Suzuki Vitara Plus is subject to the 10% VAT. LibLex Very truly yours, (SGD.) BEETHOVEN L. RUALO Commissioner of Internal Revenue