VAT Ruling No. 085-90

April 5, 1990 VAT RULING NO. 085-90 South Bay Lumber Co., Inc. Km. 7, Lanang, Davao City Attention: Mr . Jeffrey C . Alvarez Vice President/Director Gentlemen : This refers to your letter dated March 30, 1990 stating that as a log processor, you entered into a Log Processing Agreement with Hon Nam Timber Co., a Hongkong-based company, which agreement was approved by the Central bank Export Department under Ref. No. ED-TGM 89-733-589 dated December 27, 1989; that under the aforecited agreement the Hon Nam Timber Co., will procure/buy round lumber logs from Malaysia, Vietnam and other Asian countries, and ship said logs to you in Davao City for exclusive processing after which the finished products are re-shipped/exported in the name and for the account of Hon Nam Timber Co. to its designated foreign buyer. Under the foregoing circumstances, you now request for a ruling that the round logs brought to your processing plant from other countries is exempt from the value-added tax. In reply, please be informed that internal revenue taxes on imported goods are to be paid upon withdrawal or removal from customs custody (Hamlin vs. Collector of Internal Revenue, 106 Phil. 723). Inasmuch as the imported logs are to be brought in a Customs Bonded Warehouse and are to be processed therein, said logs have not as yet been withdrawn or removed from customs custody. Consequently, the said logs are not yet subject to the value-added tax. However, if said imported logs shall be removed from customs custody for local sale or consumption, the same shall be subject to the value-added tax. cdtech Very truly yours, JOSE U. ONG Commissioner of Internal Revenue