VAT Ruling No. 111-92

October 8, 1992 VAT RULING NO. 111-92 NIRC Sec. 100 (a) Precedent Ruling 202-90 LabTech Manufacturing Industries, Inc. No. 6, 21st St.,Quezon City Attention: Mr. Julius Labrador President Gentlemen : This refers to your letter to the Board of Investments dated August 29, 1992 which was referred to this Office by way of 1st Indorsement dated September 9, 1991 in effect, requesting for a ruling that your export sales (of finished products) which were coursed through Nissan (Phils.) be considered as export sales and treated as effectively zero-rated sales. It appears that you are a BOI-registered export producer of various kinds of semi-conductor products, such as electronic silicone diodes and transistors; that because of existing business tie-up between Pilipinas Nissan (Nissan) another BOI-registered export-trader, the Shindengen Electric Manufacturing Co.,Ltd. Japan (SEM) relative to the market of your products in Japan, you sold your products to Nissan which, in turn, export your products without further processing to SEM in Japan. You contend that under this arrangement, your sales to Nissan which exports your products (as is) are zero-rated transactions under Revenue Regulations No. 2-88. In reply, please be informed that Revenue Regulations No. 2-88 contemplates the zero-rating only of the sale of raw materials to a manufacturer-exporter who exports at least 70% of its total production. ( See RMO No. 22-92; VAT Ruling No. 202-90 ) It does not contemplate the zero-rating of the sale of finished goods to an export-trader who eventually exports the same. In other words, your sale of electronic silicone diodes and transistors to an export-trader is a taxable sale. The fact that there is a foreign currency remittance through Nissan, or to you directly, will not affect the treatment of said transaction as a local sale wherein you (the seller) is liable to the 10% VAT. Recording the allegation of your counsel (letter dated January 22, 1992) that prescription to issue assessment have set in for transactions occurring in the first and second semesters of 1988, please be informed that your present letter dated August 29, 1991 which was referred to this Office by way of a 1st Indorsement by the Board of Investment dated September 9, 1991 for a ruling after having been confronted with the reality of an assessment amounts to a request for reinvestigation or reconsideration which has the effect of interrupting the running of the period of prescription for the issuance of the assessment. ( CIR vs. Wyeth Suaco, G.R. 76281, September 30, 1991 ) On the basis of the foregoing the assessment, as deficiency VAT for 1988, in the amount of P22,019,173.28 issued against you is hereby confirmed and reiterated. Please pay this amount within fifteen (15) days from your receipt hereof; otherwise, the same shall be collected through summary remedies provided by law. This is the final decision of this Office on the matter. Very truly yours, (SGD.) JOSE U. ONG Commissioner of Internal Revenue