VAT Ruling No. 070-92

May 27, 1992 VAT RULING NO. 070-92 NIRC Sec. 99 100 Precedent Ruling BIR Ruling 139-92 PNOC Shipping & Transport Corp. S & L Building Roxas Boulevard Manila Attention: Elpidio M. Gamboa, Jr. S i r s : This has reference to your letter dated March 10, 1992 stating that PNOC Shipping and Transport Corporation (PSTC) is a corporation established under the Corporation Code and engaged in the business of inter-island transportation of petroleum products through domestic tankers and vessels, as such, it remits to the Bureau the 3% percentage tax on its gross receipts as provided under Section 115 of the Tax Code; and that PSTC is selling one of its ageing tankers, the "M/V Petroparcel" through public bidding. In connection with the above, you now request confirmation of your opinion that the sale of the said tanker is not subject to the payment of the value-added tax (VAT) by PSTC for the following reasons: 1. PSTC is not subject to VAT but subject to the 3% percentage tax under Section 115 of the Tax Code. As such, PSTC is not a VAT-registered taxpayer; 2. PSTC, as a transport contractor or carrier within the meaning of Section 115 of the Tax Code, is not engaged in the business of selling tankers. Parenthetically, the sale of the "M/V Petroparcel" is an isolated sale and is to undertaken in the course of trade or business of PSTC. For that matter, the sale of the "M/V Petroparcel" is for the purpose of disposing its ageing tanker and for PSTC to acquire new ones in the future. Under Section 99 of the Tax Code, an isolated sale cannot be considered as sale made "in the course of trade or business" that is subject to VAT. Premises considered, you respectfully request for a confirmatory ruling that the sale of the "M/V Petroparcel" is not subject to VAT. In reply, please be informed that "M/V Petroparcel", which is being used in the transporting of petroleum products, is being sold because it is already an old tanker and the proceeds thereof would be used to acquire new ones; so that it could correctly be stated that the sale is in the "course of trade or business" because the new tankers would replace the "Petroparcel" to carry on your business of transporting oil. Under Sections 99 and 100 of the Tax Code, you are liable to pay the 10% VAT on the gross selling price of said vessel you are selling. HIACac Very truly yours, (SGD.) JOSE U. ONG Commissioner of Internal Revenue