VAT Ruling No. 065-98

December 29, 1998 VAT RULING NO. 065-98 Sec. 106 (A) (2) (a) (5)-000-00-065-98 SGV & Co. 6760 Ayala Avenue Makati City Attention: Atty . C . P . Noel Gentlemen : This refers to your letter dated February 26, 1998 requesting for a ruling as to whether or not the sale of goods by Nissho Iwai Philippine Branch (Nissho-Iwai) to Sekusui Jushi Philippine Corporation, a PEZA-export registered enterprise located at Carmelray Industrial Park is effectively zero-rated under Section 106(A)(2)(c) of the Tax Code of 1997. It is represented that Nissho-Iwai is a corporation duly registered and licensed to do business in the Philippines by the Securities and Exchange Commission (SEC) with office address at 24/F Pacific Star Building, Makati Avenue corner Sen. Gil Puyat Avenue, Makati City; and that it is a VAT-registered entity engaged in the business of, among others, selling goods particularly the spiral wound paper core. In reply, please be informed that Article 77(2) of the Omnibus Investments Code provides that "Merchandise purchased by a registered zone enterprise from the customs territory and subsequently brought into the zone, shall be considered as export sales and the exporter thereof shall be entitled to the benefits allowed by law for such transaction." Section 106 (A)(2)(a)(5) of the National Internal Revenue Code of 1997 further provides that "Those considered as export sales under Executive Order No. 226, otherwise known as the Omnibus Investments Code of 1987, and other special laws" shall be treated as "export sales" for VAT purposes. Accordingly, the sales of goods by your client, NISSHO IWAI PHILIPPINE BRANCH, to Sekusui Jushi Philippine Corporation, a PEZA-registered enterprise located at Carmelray Industrial Park, is governed by Section 23 of R.A. 7916, otherwise known as The Special Economic Zone Act of 1995, providing that "Business establishments operating within the ECOZONES shall be entitled to the fiscal incentives as provided for under Presidential Decree No. 66, the law creating the Export Processing Zone Authority, or those provided under Book VI of Executive Order No. 226, otherwise known as the "Omnibus Investments Code of 1987" shall be effectively zero rated for VAT purposes, pursuant to the provisions of Section 106(A)(2)(a)(5), NIRC, as amended by R.A. No. 7716, and as renumbered by R.A. No. 8424. dctai Very truly yours, Commissioner of Internal Revenue By: (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner (Legal and Enforcement Group)