VAT Ruling No. 080-90

March 23, 1990 VAT RULING NO. 080-90 Tristate Industrial Co., Inc. No. 116 Sauyo Road, Novaliches Quezon City Attention: Mr . Federico Mojica Accountant Gentlemen : This refers to your letter dated August 7, 1989 wherein you represented that, your company is a BOI-registered exporter whose importation of capital equipment is exempt from tariff duty and taxes pursuant to Article 45(a) of the Omnibus Investment Code of 1981, as amended by B.P. 391; and that, it is entitled to BOI tax credits on its export sales, based on "net local content" and "net value earned" of its export sales (i.e., under ART. 48(d), ibid). As represented further, tax and duty exemption shall be subject to repayment on a yearly basis for five (5) years from the date of commercial operation by deducting the amount of exemption from the aforecited tax credits pursuant to Executive Order 1045. In reply, please be informed that since your importation of capital equipment is exempt from tariff duty and national internal revenue tax you are not required to pay the BIR the value-added tax otherwise due on your said importation of capital equipment (Section 103(u) of the Tax Code, as amended). Accordingly, your query, on whether you shall repay the said VAT amount (P1,580,619.00) through your BOI tax credit certificate and, thereafter, claim the same amount as Input Tax refund (i.e., for Input Tax on capital goods under Sec. 106(c), NIRC) is not applicable. Please be informed that the BOI scheme of deducting the amount of exemption (i.e. the 10% VAT that would have been paid on the importation of capital equipment) is only a statutory means of computing your allowable BOI tax credit. Accordingly, you cannot legally recognize in your books of accounts, any input tax that could have been generated from said importation notwithstanding the fact that the VAT due has already been charged by the BOI. Such being the case, you cannot also claim for the refund of any input tax under the provisions of Section 106(c) of the Tax Code as amended simply because no VAT has actually been paid on said transaction. prcd Very truly yours, JOSE U. ONG Commissioner of Internal Revenue