VAT Ruling No. 084-01

December 18, 2001 VAT RULING NO. 084-01 Sec. 106 (A) (2) (a) (1) VAT Ruling No. 029-2001 Reysons Exim International, Inc. No. 77 Guirayan Street Araneta Subdivision Quezon City Attention: Mr. Ismael D. Reyes President Gentlemen : This refers to your letter dated July 24, 2001 requesting for a ruling as to whether or not, Reysons Exim International, Inc. (Reysons), as a VAT-registered person, shall qualify for zero percent (0%) rate on its export sale to a foreign country pursuant to Section 106(A)(2)(a)(1) of the Tax Code of 1997. It is represented that Reysons is a domestic corporation duly registered with the Securities and Exchange Commission (SEC); that it is a VAT-registered entity engaged in export/trading business with Registration Certificate No. 30A-4-009494; and that Reysons is engaged in the manufacture of assorted foodstuffs and it sells assorted foodstuffs to foreign countries and receives payment in foreign currency and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP) as shown in its Commercial Invoices duly issued on May 16, 2001 and July 16, 2001. In reply thereto, please be informed that Section 106(A)(2)(a)(1) of the Tax Code of 1997 provides that the sale by a VAT-registered person shall be subject to zero percent (0%) rate on its export sales. The term "export sales" means, among others, the sale and actual shipment of goods from the Philippines to a foreign country, irrespective of any shipping arrangement that may be agreed upon which may influence or determine the transfer of ownership of the goods so exported and paid for in acceptable foreign currency or its equivalent in goods or services, and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas. It is clear from the above-cited section that Reysons' export sale and actual shipment of its assorted foodstuffs to foreign countries irrespective of any shipping arrangements and paid for in foreign currency and accounted for in accordance with the rules and regulations of the BSP is indeed subject to value-added tax at zero percent (0%) rate considering further that such foodstuffs are destined, used or consumed outside of the Philippines. ( VAT Ruling No. 47-2000 dated October 26, 2000 ) As such, Reysons shall be entitled to a refund or credit of whatever input taxes attributable to its export sales, pursuant to Section 112(A) of the Tax Code of 1997, which in part provides "Section 112. Refunds or Tax Credits of Input Tax . "(A) Zero-rated or Effectively Zero-rated Sales. Any VAT-registered person, whose sales are zero-rated or effectively zero-rated may, within two (2) years after the close of the taxable quarter when the sales were made, apply for the issuance of a tax credit certificate or refund of creditable input tax due or paid attributable to such sales, except transitional input tax, to the extent that such input tax has not been applied against output tax; Provided, however, That in the case of zero-rated sales under Section 106(A)(2)(a)(1), (2) and (B) and Section 108(B)(1) and (2), the acceptable foreign currency exchange proceeds thereof had been duly accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP); Provided, further, That where the taxpayer is engaged in zero-rated or effectively zero-rated sale and also in taxable or exempt sale of goods or properties or services, and the amount of creditable input tax due or paid cannot be directly and entirely attributable to any one of the transactions, it shall be allocated proportionately on the basis of the volume of sales." (VAT Ruling No. 029-2001 dated May 22, 2001) This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be disclosed that the facts are different, then this ruling shall be considered null and void. Very truly yours, Commissioner of Internal Revenue By: (SGD.) EDMUNDO P. GUEVARA Deputy Commissioner Legal & Inspection Group