VAT Ruling No. 077-02

November 11, 2002 VAT RULING NO. 077-02 Sec. 108 (B) (1) 000-00 Sunflower Umbrellas Manufacturing Co . ,Inc . 126128 Kaingin Road Balintawak, Quezon City Attention: Ms . Letty Balonan General Manager Gentlemen : This refers to your letter dated November 15, 2000, in effect requesting reconsideration of VAT Ruling No. 041-2000 dated October 23, 2000 which ruled that as a Non-VAT registered taxpayer, you cannot enjoy the benefit of zero percent (0%) VAT. As represented in your letter dated October 18, 1999, Sunflower Umbrella Manufacturing Company, Inc. is a domestic corporation organized and registered with the Securities and Exchange Commission with SEC Reg. No. 140856 on May 26, 1987; that Sunflower manufactures umbrellas as a labor subcontractor for foreign companies in other countries; that these foreign companies send their raw materials for assembling which Sunflower re-exports; that these foreign companies remit the subcontractor's fees in US dollars to Sunflower through the local banks upon export of the finished goods; and that as per document which you now submitted, Sunflower is a VAT taxpayer. In reply, please be informed that Section 108(B)(1) of the Tax Code of 1997 provides, viz : "SEC. 108. Value-added Tax on Sale of Services and Use or Lease of Properties . xxx xxx xxx "(B) Transactions Subject to Zero Percent (0%) Rate . The following services performed in the Philippines by VAT-registered persons shall be subject to zero percent (0%) rate: "(1) Processing, manufacturing or repacking goods for other persons doing business outside the Philippines which goods are subsequently exported, where the services are paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP);" In view thereof, considering that you are already a VAT-registered taxpayer, your aforesaid services which are paid for in acceptable foreign currency shall be subject to zero percent (0%) VAT. This ruling is issued on the basis of the facts as represented. If upon investigation it will be disclosed that the facts are different, then this ruling shall be considered null and void. Very truly yours, (SGD.) GUILLERMO L. PARAYNO, JR. Commissioner of Internal Revenue