VAT Ruling No. 065-99

July 7, 1999 VAT RULING NO. 065-99 106 (A) (2) (a) (2) VAT Ruling No. 005-99 065-59 Foamcraft, Inc . Unit E-1502 B. Tektite Towers Tektite Road, Ortigas Center Pasig City Attention: Mr . Abraham S . Pua General Manager Gentlemen : This refers to your letter dated April 7, 1998 requesting for a ruling that the sale of packaging materials to IOMEGA CORPORATION, a US-based corporation, which are to be delivered to a PEZA-based company located in Laguna, is subject to zero percent (0%) rate VAT pursuant to Section 106(A)(2)(a)(2) of the Tax Code of 1997. It is represented that Foamcraft, Inc. is a BOI-registered firm engaged in the manufacturing of Polyurethane Foam; that part of its market base is the electronics sector for packaging materials; that one of your prospective regular customers is IOMEGA CORPORATION which is US-based company that produces electronic products such as computer drives; that Foamcraft, Inc. does not, however, export directly to the U.S.A.; that as instructed by its non-resident buyer as shown in the attached Purchase Order (P.O.) the delivery point of the packaging products, is Electronics Assembly, Incorporated (EAI), a PEZA-based company located at Block 1, Lot 2, Solid St., LIIP, Bian, Laguna; and that all the goods that Foamcraft, Inc. will deliver to EAI shall be for the account of IOMEGA Corporation; and that the latter will remit inwardly in foreign currency payments, i.e., in US dollars through an accredited bank. In reply, please be informed that pursuant to Section 106(A)(2)(a)(2) of the Tax Code of 1997 (then Section 100(a)(2)(A)(2) of the Tax Code, as amended), which reads, thus "SEC. 106. Value-Added Tax on Sale of Goods or Properties . "(A) Rate and Base of Tax . . . . "(2) The following sales by VAT-registered persons shall be subject to zero percent (0%) rate: "(a) Export Sales . The term ' export sales ' means: "(1) . . . "(2) Sale of raw materials or packaging materials to a non-resident buyer for delivery to a resident local export-oriented enterprise to be used in manufacturing, processing, packing or repacking in the Philippines of the said buyer's goods and paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BS);" llcd Based on the foregoing, your sale of packaging materials to IOMEGA Corporation which are to be delivered to Electronics Assembly, Incorporated, a local export-oriented corporation located in LIIP, Bian, Laguna for the packing and/or packaging of the IOMEGA's goods, and which are paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the BSP, is subject to zero percent (0%) VAT. This is likewise consistent with the cross-border doctrine of the VAT System (VAT Ruling No. 005-99). This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation it will be disclosed that the facts are different, then this ruling shall be considered null and void. Very truly yours, Commissioner of Internal Revenue By: (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner Local & Enforcement Group