VAT Ruling No. 082-92

June 23, 1992 VAT RULING NO. 082-92 NIRC Sec. 104 (a) (2) Precedent Ruling BIR Ruling 157-89 Pearl Islands Commercial 37 Igdalig cor. Mauban St. Quezon City Attention: Ms. Natividad Alog Chief Accountant S i r s : This refers to your letter dated February 7, 1992 requesting a ruling on the accounting treatment of input tax deemed paid. It is represented that Company A buys raw materials from Company B which is a BOI-registered pioneer enterprise enjoying 75% tax exemption. You are now asking if Company A can consider the input tax which can be claimed from the purchase to include the input tax deemed paid generated from the transaction. In reply, please be informed that Section 104(a)(2) of the Tax Code, as amended, states that "In case tax exempt products of a pioneer enterprise registered with the BOI as of August 1, 1986 are sold domestically to VAT-registered person, the VAT otherwise due on such products shall be considered as input tax creditable against the output tax payable''. In other words, the input tax deemed paid generated from the purchase from the BOI-registered pioneer enterprise is creditable against the output tax liability of Company A. The input tax deemed paid is actually an incentive to purchasers to buy the tax-exempt products of pioneer enterprises because it effectively reduces its cost of purchases. CcSTHI Very truly yours, JOSE U. ONG Commissioner of Internal Revenue By: (SGD.) EUFRACIO D. SANTOS Deputy Commissioner Officer-in-Charge