VAT Ruling No. 089-99

August 16, 1999 VAT RULING NO. 089-99 112 (D)-000-00-098-99 Hapag-Llloyd South East Asia Sdn. Bhd. 7th Floor, Wisma Subang Jaya 47500 Petaling Jaya, Selangor Darul Ehsan Malaysia Attention: Dr . Ralf Lisch Managing Director Gentlemen : This refers to your letter dated July 9, 1999 (1) requesting clarification on the VAT Ruling issued to the Domestic Shipowners Association (VAT Ruling No. 062-98 dated December 15, 1998) and (2) seeking advise as to the time required in getting VAT refund. cdll As stated, it is established in the said ruling that no VAT is applicable to outbound services rendered by domestic carriers to international carriers whereas all inbound transshipment of goods is subject to 10% VAT, e.g. Cebu to Singapore 0% VAT Singapore to Cebu 10% VAT However, you would like to be clarified on the application of VAT for export shipments from outports with transshipment via Philippine ports, e.g. cargo originating from General Santos being transhipped in Manila for oncarriage to Singapore whereby there is only one bill of lading from General Santos to final destination. It is your opinion that applying the above ruling, two possible interpretations may be made as follows: 1. That 0% VAT remains applicable, otherwise, outports without direct feeder connection to foreign ports would be discriminated against ports with direct feed connections, which in your view, cannot be the intention of the VAT Ruling; or 2. That 10% VAT applies for shipment from the outport to the transshipment port, (from General Santos to Manila) and only the further leg from port of transshipment to the foreign port (from Manila to Singapore) is eligible for 0% VAT. prcd In reply, please be advised that, consistent with the Destination Principle of the VAT system which is being observed in this jurisdiction wherein we adhere to the basic doctrine that VAT is imposed on imports and zero-rated on exports, this Office is of the opinion, and hereby holds, that zero percent (0%) VAT should likewise apply to the domestic shipment of exportable goods transhipped by domestic lines from the outport to the transshipment port, as is the case outlined in premise number two above. However, this is subject to the condition that the shipment is covered by only one bill of lading, i.e. from the outport to final destination, in order to distinguish the same from carriage of goods which is purely for domestic consumption. As regards your query on the time within which the refund or tax credit of input taxes shall be made, please be advised that under our tax law, the Commissioner of Internal Revenue is mandated to grant the refund or tax credit within one hundred twenty (120) days from the date of submission of complete documents in support of the application filed. (Section 112(D), Tax Code of 1997). Perhaps, what lengthens the process is the lack of complete documentation to support the claim. At any rate, please refer to this Office any refundable case in which you have direct interest in and we shall see to it that the same is processed on time. Very truly yours, (SGD.) BEETHOVEN L. RUALO Commissioner of Internal Revenue