VAT Ruling No. 071-99

July 22, 1999 VAT RULING NO. 071-99 106 (A) (2) (a) 020-95 071-99 Aloha Textile & Garments, Inc . Meycauayan, Bulacan Attention: Ms . Ellenda D . Sy Corporation Treasurer M a d a m : This refers to your letter dated April 12, 1999 requesting confirmation that your company, being registered with the Board of Investment as a New Export Producer (100% export sales) on a non-pioneer status, is subject to 0%-VAT. Since it has been granted a 4-year income tax holiday incentive by the BOI, it is likewise exempt from income tax and consequently from the 1% creditable expanded withholding tax. In reply, please be informed that Section 106(A)(2)(a) of the 1997 Tax Code, as implemented by Section 4.100-2(a) of Revenue Regulations No. 7-95, as amended, subjects to zero percent (0%) rate: "(a) Export Sales . The term ' export sales ' means: (1) The sale and actual shipment of goods from the Philippines to a foreign country, irrespective of any shipping arrangement that may be agreed upon which may influence or determine the transfer of ownership of the goods so exported and paid for in acceptable foreign currency or its equivalent in goods or services, and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP); "(2) . . . "(x) . . . (5) Those considered export sales under Executive Order No. 226 otherwise known as the Omnibus Investment Code of 1987 and other special laws." Moreover, Revenue Regulations No. 2-98, as amended, provides for the exemption from the 1% creditable expanded withholding tax, as follows: "SEC. 2.57.5. Exemption from Withholding . The withholding of creditable withholding tax prescribed in these Regulations shall not apply to income payments made to the following: "(A) . . .; "(B) Persons enjoying exemption from payment of income taxes pursuant to the provisions of any law, general or special, such as but not limited to the following:" "(1) . . ." "(2) Corporations registered with the Board of Investments and enjoying exemption from the income tax provided by Republic Act No. 7916 and the Omnibus Investment Code of 1987;" "(3) . . ." Accordingly, since your company is registered with the BOI as a New Export Producer in accordance with the provisions of Executive Order 226, your company is accorded 0%-VAT status on your export transactions pursuant to Section 106(A)(2)(a) of the 1997 Tax Code, as implemented by Section 4.100-2(a) of Revenue Regulations No. 7-95, as amended. Likewise, your company is exempt the payment of income tax imposed by Section 27 of the 1997 Tax Code, and consequently from the creditable expanded withholding tax imposed under Revenue Regulations No. 2-98, as amended, on income payments received by your company during the period when such income tax holiday incentive is enjoyed, subject, however to the condition that the BOI specific terms and conditions for the grant of ITH are met during said period. Very truly yours, (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner (Local & Enforcement Group)