You are on page 1of 1

BIR RULING [DA-119-06]

FILGIFTS.COM, INC is a corporation duly organized and existing under the Philippines. Filgifts provides online shopping mall
wherein clients can purchase gifts, flowers and other similar items online while they are situated outside the Philippines, and
deliver the same to their relatives here in the Philippines; and that the clients are billed in US Currency and that all payments
are made through credit card charging and the collections received by Filgifts are also in US Currency. It contends that their
sales to its non-resident clients for delivery to a resident of the Philippines, which are paid through credit card charging in US
Currency, can be considered as "foreign currency denominated sales" and therefore, subject to value-added tax ("VAT") at zero
percent (0%) rate; and that the unutilized excess input VAT of Filgifts from its local purchases which are directly attributable or
ratably apportioned to its zero-rated sales can be claimed for refund or tax credit.
Held:
"SEC. 106. Value-added Tax on Sale of Goods or Properties.
(A) Rate and Base of Tax.
xxx xxx xxx
(2) [ Zero-rated Sales.] The following sales by VAT-registered persons shall be subject to zero percent (0%) rate:
xxx xxx xxx
(b) Foreign Currency Denominated Sale. The phrase 'foreign currency denominated sale' means sale to a non-resident of goods,
except those mentioned in Sections 149 and 150, assembled or manufactured in the Philippines for delivery to a resident in the
Philippines, paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the Bangko
Sentral ng Pilipinas (BSP)."

The above-quoted provision of law is implemented by Section 4.106-5 of Revenue Regulations No. 16-2005, as follows:
"SEC. 4.106-5. Zero-rated sales. A zero-rated sales by a VAT-registered person, which is a taxable transaction for VAT purposes,
shall not result in any output tax. However, the input tax on his purchases of goods, properties or services related to such zero-rated
sale shall be available as tax credit or refund in accordance with these regulations. The following sales by VAT-registered persons
shall be subject to zero percent (0%) rate:
(a) E xport Sales
(b) " Foreign currency denominated sale" means the sale to a non-resident of goods, except those mentioned in Secs. 149 and 150 of
the Tax Code, assembled or manufactured in the Philippines for delivery to a resident in the Philippines, paid for in acceptable
foreign currency and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP)."

The premises being considered and since the sales of Filgifts to its non-resident clients for delivery to a resident of the
Philippines are being paid for in US Currency through credit card charging, such sales are considered foreign currency
denominated sale, and thus subject to value-added tax at zero percent (0%) rate.
Furthermore, the unutilized excess input VAT of Filgifts from its local purchases which are directly attributable or ratably
apportioned to its zero-rated sales can be claimed for refund or tax credit pursuant to Section 112 of the Tax Code of 1997 (VAT
Ruling No. 055-98 dated December 2, 1998), as amended and subject to compliance of the invoicing requirements under
Revenue Regulations (RR) No. 7-95,as amended by RR No. 14-2005.