January 19, 2007

BIR RULING [DA-031-07]

RMC 74-99; DA 603-06

Jen & Janette Junkshop

Sambat, Tanauan City

Attention: Mrs. Flor Ofrin

Proprietress
Gentlemen :

This has reference to your letter dated November 29, 2006 requesting
clarification on the alleged conflicting opinion of the BIR: the one issued by the
BIR-San Pablo and the one issued by the BIR-National Office appertaining to the
same set of facts.

It is represented that Jen & Janette Junkshop (J & J for brevity), is engaged in
the business of buying scrap metal from business enterprises located within the
Philippine Economic Zone Authority (PEZA). One of the enterprises that sells scrap
metals imposes the 12% VAT in addition to the 12% VAT which the Bureau of
Customs collects prior to the release of the same to the customs territory. In sum, J&J
is paying a total of 24% value-added tax everytime it hauls from PEZA for the same
specific items.

In reply, please be informed that the sale of goods by a PEZA enterprise to a

buyer from custom territory, is treated as technical importation made by the buyer. In
such event, the buyer is considered as importer thereof and shall be liable for the
corresponding value-added tax on importation (see Revenue Memorandum Circular
No. 74-99)

Apparently, Ibiden is imposing or collecting the 12% VAT on your every

purchase of metal scrap because it knows for a fact that such sale is subject to VAT.
However, such value-added tax payment is supposed to answer for the alleged
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 technical importation that ultimately will be remitted to the government. In which
case, the Bureau of Customs is no longer required to collect the value-added tax
before the scrap metal is taken out from PEZA.

Thus, to clear all conflicts, and considering that J & J is an importer in this
case, the payment of the value-added tax on importation should be made by J & J
directly to the Bureau of Customs as the agency tasked to collect the VAT on
importation. Resultantly, Ibiden is not anymore required to impose VAT on every
sale of metal scrap. Ibiden, however, should be furnished a copy of the receipt of the
payment of the VAT with the Bureau of Customs.

This will be therefore serve as your authority to request Ibiden to refrain from
imposing VAT on the sale of scrap to J & J since the Bureau of Customs is also
collecting the same before the goods are purchased and released.

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,

(SGD.) JAMES H. ROLDAN

Assistant Commissioner
Legal Service
Bureau of Internal Revenue

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