BIR Ruling No.

DA-066-08 (Diamond Star Agro Products, Inc) WON the sale of goods, properties or services by VAT-registered suppliers to
Date | Justice, J. | Specific Topic in Syllabus
DIAMOND STAR AGRO being considered export sales shall be subject to 0%
VAT rate without need of prior approved application with the appropriate BIR
SUMMARY: Diamond, a domestic corporation is VAT registered and likewise office for effective zero-rating. YES.
BOI-registered. Its sales of goods and services are considered export sales
subject to 0% VAT, consequently, its purchases from suppliers which are to be
used exclusively for production are subject to 0% VAT rate. BIR denied its RATIO:
suppliers of the 0% VAT rate because they allegedly needed to secure an 1. Pursuant to RMO No. 9-2000, sales of goods, properties or services by
application for VAT zero-rating. BIR ruled that an approval is no longer VAT-registered suppliers to BOI-registered exporters shall be treated as
necessary since the relevant RMO grants automatic zero-rated sales status to the automatically zero-rated sales, without need of prior approval from this
supplier and the BOI-registered supplier provided that: Office, provided that supplier and the BOI-registered buyer are both VAT-
1. Both of them are VAT registered registered taxpayers and provided further that the buyer is classified as
2. The buyer is classified as 100% exporter by the Board of Investments 100% exporter by the Board of Investments (BOI).
(BOI). 2. Since the sales of goods, materials, properties and services by VAT-
Take note that the sales of goods / services to buyer must be for the exclusive registered suppliers to DIAMOND (a registered 100% export producer),
use of the buyer’s production of agricultural food products. which are for the exclusive use of the latter's production of agricultural food
products, fall within the definition of export sale under E.O. No. 226 such
DOCTRINE: BIR ruled that an approval is no longer necessary since the sale is the export sale contemplated by Section 106 (A) (2) (a) (5) of the
relevant RMO grants automatic zero-rated sales status to the supplier and the Tax Code of 1997 as implemented by RR No. 16-2005, which is subject to
BOI-registered supplier provided that: VAT zero-rating.
1. Both of them are VAT registered 3. Furthermore, under Section 4.106-6 of RR 16-2005, sales to a BOI-
2. The buyer is classified as 100% exporter by the Board of Investments registered enterprise [Sec. 4.106-5 (a) above] whose products are 100%
(BOI). exported which are subject to VAT at zero percent (0%) rate do not require
prior approved application with the appropriate BIR office for VAT zero-
rating.
FACTS:
1. DIAMOND is a DC that is engaged in the processing of agricultural
products and is a duly registered VAT taxpayer. It is likewise a BOI-
registered producer whose products are 100% exported.
2. It is contended that pursuant to RR 16-2005, sale of goods, properties or
services made by VAT-registered suppliers to a BOI-registered
manufacturer/producer whose products are 100% exported are considered
export sales which is subject to 0% VAT rate and so the company’s local
purchases of goods, materials, properties and services used exclusively for
the production of agricultural food products, which are 100% exported, are
subject to VAT at 0% rate.
3. However, Diamond’s VAT-registered suppliers were denied by some BIR
personnel of the status of VAT zero-rating because they failed to secure an
approved application for VAT zero-rating.

ISSUE: