VAT Ruling No. 075-01

October 17, 2001 VAT RULING NO. 075-01 RMO No. 9-2000 Canon Information Technologies Philippines, Inc. 27/F Jollibee Plaza, Emerald Avenue Ortigas Center, Pasig City 1605 Philippines Attention: Benjamin S. Reyes Accounting Manager Gentlemen : This refers to your letter dated May 11, 2001 requesting for a ruling that suppliers of BOI-registered service providers that provide services to non-resident foreign corporations are subject to zero percent (0%) VAT pursuant to Revenue Memorandum Order No. 9-2000 (RMO No. 9-2000). It is represented that Canon Information Technologies Philippines, Inc. (Canon) is a pioneer in the design of software and hardware products. Canon caters only to foreign based clients, particularly those based in Japan. All of its revenues are in foreign currency regularly remitted by its clients. Canon employs the services of more than a hundred information technology professionals and in the year 2000, it generated more than P128,000,000.00 in foreign currency earnings. It is the position of Canon that pursuant to RMO No. 9-2000 its suppliers qualify for automatic VAT zero-rating on their sales to Canon. In reply, please be informed that RMO No. 9-2000 explicitly provides that it covers only VAT-registered suppliers of enterprises duly registered with the Board of Investments as manufacturer-exporter and whose manufactured products are 100% exported to foreign countries. Section 3 of RMO No. 9-2000 includes as one of the conditions for VAT-registered suppliers to be accorded VAT zero-rating the following: "The buyer must be a BOI-registered manufacturer producer whose products are 100% exported. For this purpose a Certification to this effect must be issued by the Board of Investment (BOI) and which certification shall be good for one year unless subsequently re-issued by the BOI" Canon, not being a manufacturer but a service provider cannot invoke RMO No. 9-2000 as basis that its VAT-registered suppliers qualify for VAT zero-rating. Consequently, Canon's suppliers cannot qualify for VAT zero-rating on their sales to Canon. Very truly yours, Commissioner of Internal Revenue By: (SGD.) EDMUNDO P. GUEVARA Deputy Commissioner Legal & Inspection Group