VAT Ruling No. 083-88

April 14, 1988 VAT RULING NO. 083-88 102-a (3)-081-88-083-88 Association of International Shipping Lines, Inc. 2nd Floor, Heritage Condominium Manila Attention: J . O . Garcia President Gentlemen : This refers to your letter dated February 16, 1988 requesting a ruling on the applicable tax rates on certain charges/fees for services rendered to vessels of foreign shipping companies when calling on Philippine Ports which are paid by the local agents for the account of foreign principals. cdtech It is represented that the aforesaid charges are for the account of the foreign principals and are paid by the latter through their agents in the Philippines; that the agent's bill the principals for such services/expenses; that the foreign principals remit the foreign currency to the agents who, in turn, pay in pesos the enterprise rendering the services; that the source of foreign currency is the foreign principal; and that local agents merely act as conduit of the foreign principals for whose account these expenses were incurred. In reply, please be informed as follows: 1. The following charges which are paid to PRA are not subject to VAT because these are payments for the use of government facilities: a) Harbor fees; b) Berthing and/or anchorage fees; c) Wharfage charged; and d) Storage fee. Pursuant to Sec. 102(2) of the Tax Code, as amended, pilotage fee and electrical consumption charged paid to PPA and all other charges billed for the services rendered by the various contractors/entities to the foreign principal and paid through the local agents are subject to the value-added tax of 0% provided the person rendering the service is VAT-registered; the service is paid in acceptable foreign currency and accounted for in accordance with Central Bank regulations; and the charge for such service is for the account of the foreign principal and billing is made directly to them through the shipping agents. The services to be zero-rated subject to the foregoing conditions shall include: a) Tug boat services for docking/undocking; b) Launch service; c) Security service by watchmen on board; d) Line handlers; e) Stevedoring charges; f) Terminal handling fee; g) Stripping charges; h) Cranage; i) Arrastre charges; j) Lift on/lift off charges; k) Container repair and cleaning; l) Pre-trip inspection charges on refrigerated containers; m) Surveyor Fees; n) Brokerage fees on transshipment; o) Container stuffing; p) Cartage and handling expenses; and q) Printing of bill of lading/interchange receipt. aisadc The supply of spare parts to ships is, in effect, a sale of goods; hence, not entitled to zero rating under Section 102 (2) of the Tax Code, as amended. Very truly yours, BIENVENIDO A. TAN, JR. Commissioner of Internal Revenue By: VICTOR A. DEOFERIO, JR. Deputy Commissioner