VAT Ruling No. 101-92

August 20, 1992 VAT RULING NO. 101-92 NIRC Sec. R.R. 2-88 Precedent Ruling 035-92 Board of Investments Industry and Investment Bldg. 385 Gil A. Puyat Makati, Metro Manila Attention: Mr. Justiniano Y. Ascano Director and General Counsel S i r : This has reference to your indorsement letter dated December 26, 1991 regarding the letter-request of North LB Manufacturing Corporation on behalf of Republic Corrugated Cartons and Alcohol, Inc.'s application for zero-rating VAT on its sale of packing materials to the former. It is represented, that North LB Manufacturing Corporation is a domestic corporation; that 98% of its capital stock is owned by Yoshiro Akasaka and Kizon Fujitsa, both Japanese nationals and 2% by Filipinos; that said corporation has been authorized by the Board of Investments to engage in the manufacture and export of wooden chopsticks to Japan, under Article 47, Book II of Executive Order No. 226, per Certificate of Authority No. 1902 dated October 21, 1988. In reply, please be informed that Section 2 of Revenue Regulations No. 2-88 explicitly provides that only the sale of raw materials which shall form part of the products to be exported to export oriented BOI-registered enterprises whose export sales, under rules and regulations of the Board of Investments exceed seventy percent (70%) of its total annual production shall qualify for effective zero-rating. Raw materials shall be understood as referring to those articles intended for conversion into or intended to form part of the finished product. Based on the foregoing, since packing materials sold by Republic Corrugated and Alcohol, Inc. to North LB Manufacturing Corporation are not intended for conversion into or intended to form part of the finished product, the sale thereof shall be subject to VAT in accordance with Section 100(a) of the Tax Code. Very truly yours, (SGD.) JOSE U. ONG Commissioner of Internal Revenue