BoI certificate

Advanced Fashion Inc., Starcar Garment Enterprises, Inc., and Jasmine Garment Corp. are members of a group of companies; are all registered with the Board of Investments; and are all registered with the Garments and Textile Export Board.

The manufactured products of all three companies are 100% exported.

Under Revenue Memorandum Order No. 9-2000 dated Feb. 2, 2000, the sale of goods, properties or services made by a VAT-registered supplier to a BoI-registered exporter whose products are 100% exported may be entitled to zero percent VAT, provided the BoI has certified that such buyer-manufacturer is a BoI-registered 100% exporter.

The BoI has, however, refused to issue a certificate to the AFI/SGEI/JGC group because both the BoI and the Bureau of Internal Revenue are still preparing the guidelines for the implementation of RMO 9-2000.

The AFI/SGEI/JGC group seeks clarification on two issues:

1. Whether the BoI certification under RMO 9-2000 is a ministerial requirement only and, therefore, other export documents such as those issued by the GTEB may be used as basis in determining whether the group actually exports 100% of its products; and

2. Whether the group’s purchases of goods, properties and services are already entitled to zero-rating VAT (even without the BoI certificate), based on the cross border doctrine of the Philippine VAT system.

There is no legal basis to grant the request of the AFI/SGEI/JGC group.

1. Based on Section 2 of RMO 9-2000, "the rationale of RMC 74-99 may also find application to sales made by VAT-registered suppliers to BoI-registered enterprises whose manufactured products are 100% exported to foreign countries. Therefore, such sales can, likewise, be accorded automatic zero-rating treatment."

RMC 74-99 deals with sales made to companies registered with the Philippine Export Zone Authority while RMO 9-2000 deals with sales made to BoI-registered enterprises whose manufactured products are 100% exported. Neither RMC 74-99 or RMO 9-2000 may be enlarged to embrace other exporters, such as those registered with the GTEB.

It is the BoI which will determine whether a BoI-registered company or a group of companies is indeed a 100% exporter. In the absence of such a certification from the BoI, the VAT-registered suppliers of a company or a group of companies cannot enjoy the benefit of zero percent VAT.

2. The benefit of the zero percent VAT means total exemption from the payment of the 10% VAT. The doctrine of exemption from the tax is strictly construed against the claimant.

This has been held in the case of Consuelo P. Borja vs. Collector of Internal Revenue: "Exemptions from taxations are highly disfavored in law; and he who grants exemptions must be able to justify his claim by the clearest grant of organic or statute law. In other words, an exemption from the common burden cannot be permitted to exist upon vague implication (Asiatic vs. Petroleum Co. vs. Llanes, 49 Phil., 466; see also House vs. Posadas, 53 Phils., 338; Collector of Internal Revenue vs. Manila Jockey Club, Inc., 98 Phils., 670)."

Again, while the cross border doctrine has been extended to PEZA- and BoI-registered exporters under RMC 74-99 and RMO 9-2000, the same doctrine does not cover exporters under the GTEB and other laws.

(VAT ruling No. 49-2001 dated July 18, 2001. This ruling is issued on the basis of represented facts. However, if upon investigations, it will be disclosed that the facts are different, then this ruling shall be considered null and void).