BIR Ruling No. 386-2021

REPUBLIC OF THE PHILIPPINES

DEPARTMENT OF FINANCE BUREAU OF INTERNAL REVENUE

Quezon City

Section 109 (l)(A) of the Tax Code of 1997, as amended BIR Ruling No. 557-2019 BIR Ruling No. 283-2015 BIR Ruling No. 039-1998

VT-386-2021 C SAN MIGUEL FOODS, INC.

Brgy. Ugong, Pasig City 100 E. Rodriguez Jr. Avenue

Attention: Fiorence P. Pavon Chief Finance Officer

Gentlemen:

This refers to your request, on behalf of SAN MIGUEL FOODS, INC. ("SMFI for brevity), for confirmation that the sale of chicken, pork, beef and other meat products (the "Meat Products"), which have undergone the simple processes of preparation and preservation for the market, is considered a sale of such products in their original state thus, exempt from value added tax (VAT) under Section 109 of the National Internal Revenue Code of 1997 (Tax Code), as amended.

It is represented that SMFI (TIN: is a domestic corporation Organized and existing under the laws of the Philippines to primarily "carry on the business of acquiring, breeding, raising, slaughtering, preserving, processing, dealing in and selling chicken, fowl, cattles, calves, hogs, goats, sheep, lambs, fish, other animals for food purposes and all kinds of poultry and livestock for food purposes.:

Pursuant to the foregoing, SMFI sells raw or uncooked Meat Products. Prior to the sale thereof in chicken stations set up iu supermarkets and meat shops, as well as sales to operators of lechon manok (i.e., Chick 'n Juicy) outlets, the Meat Products undergo the simple processes of preparation and preservation for the market through cutting, slicing, deboning, stuffing in raw hog casing, formed into shapes such as patties or balls, wrapped in flour, shredding. grounding, skewering, chilling or blast frozen and

raw/fresh vegetables,lemongrass, sesame, breadcrumbs and/or flour/flour based breading. the addition of nitrite preservatives, salt, pepper, sugar, honey, cayenne, spices, seasonings, vinegar, soy sauce, liquid condiments/ingredients, ginger, garlic, herbs!

as well as other products similarly prepared and preserved, falls within the purview of the definition of food products in their original state, thus, exempt from VAT under You now request for confirmation that the sale by SMFI of the Meat Products,

Section 109(1)(A) of the Tax Code, as amended.

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VAT-3G0 5 OCT 1 3 2021

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In reply, please be informed that Section 109(1)(A) of the Tax Code, as amended, provides:

"SEC. 28. Exempt Transacticns. = (1) Subject to the provisions of Subsection (2) hereof, the following transactions shall be exempt from the value-added tax:

(A) Sale or importation of agricultural and marine food products in their original state, livestock and poultry of a kind generally used as, or yielding or producing foods for human consumption; and breeding stock and geneiic materials therefor.

Products classified under this paragraph shall be considered in their original state even if they have undergone the simple processes of preparation or preservation for the market, such as freezing drying, salting, broiling, roasting, smoking or stripping Polished and/or husked rice, corn grits, raw cane sugar and molasses, ordinary salt, and copra shall be considered in their original state; " (emphasis supplied)

Relative thereto, Revenue Regulations (RR) No. 16-2005, as amended, provides:

"SECTION 4.109.-1. VAT-Exempt Transactions.

(B) Exempt Transactions. -

(1) Subject to the provisions of Subsection (2) hereof, the following

transactions shall be exempt from VAT:

(a) Sale or importation of agricultural and marine food products in

their original state, livestock and poultry of a kind generally used as, or yielding or producing foods for human consumption: and breeding stock and genetic materials therefor.

Livestock shall include cows, bulls and calves, pigs, sheep. goats and rabbits. Poultry shall include fowls, ducks, geese and turkey. Livestock or poultry does not include fighting cocks, race horses, zoo animals and other animals generally considered as pets.

xxxxxx XXX

Meat, fruit. fish. vegetables and other agricultural and marine food products classified _under this__paragraph shall be considered in their original state even if they have undergone the simple_processes_of preparation or_preservation for the market, such as freezing, drying, salting, broiling, roasting.

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smoking or..stripping.. including those.using advance technological means of packaging, such as shrink wrapping in plastics...vacuum__packing. tetra-pack.and other similar packaging methods. " (Emphasis supplied)

Based on the above-cited provisions, it is clear that for as long as SMFI's chicken, beef or pork meat products are sold raw and uncooked, the same are still considered agricultural food products in their original state, and therefore exempt from VAT. This necessarily includes raw meat products which have undergone simple processes of "preparation" i.e. cutting, slicing, deboning, stuffing in raw hog casing formed into shapes such as patties or balls, wrapped in flour, shredding, grounding. skewering, chilling or blast frozen and "preservation" through "salting" and "curing" it with nitrite preservatives, sait, pepper. sugar, honey, cayenne, spices, seasonings, vinegar, soy sauce, liquid condiments/ingredients, ginger, garlic, herbs, raw/fresh vegetables, lemongrass, sesame, breadcrumbs and/or flour/flour based breading, even as the meats are packed or contained "using advanced technological means".

"broiling" and "roasting" of chicken (i.e. lechon manok) as covered by the VAT The foregoing adheres to the legislative intent of Congress which even considers

exemption. As "preparation" and "preservation" are basic food methods and requires lesser processes than "broiling" and "roasting" (cooking), SMFI's raw and uncooked meat products fall well within the coverage of Section 109(1)(A) of the Tax Code and Revenue Regulations (RR) No. 16-2005.

The records of the Bicameral Conference Committee show the following deliberations, to wit:

just few example that would show that the House is more "MR. DAMASING: More or Less, Your Honor, can you give us

receptive to the cry of the poor people rather than the Senate.

able to get a presumptive tux credit for certain items --food items "MR. JAVIER (E). Well, for example, your Honor, one is we were

which are being purchased mostly by our workers. Like, sardines, canned fish, milk, sugar and then cooking oil. Then another, would be -- we refined the definition of agricultural products. For example, it now included roasting and broiling So, if our worker who goes home at night because of traffic stops at ANDOK'S LECHON ani buys roasted chicken on a take-out basis NO VAT will be imposed on his purchase of that roasted chicken. " (Emphasis supplied)

The foregoing discussion of Congress was the same basis in BIR Ruling No. 0557-2019 dated October 3, 2019 confirming that the sale of chicken, which has undergone the simple process of roasting. on a take-out basis, is covered by the VAT- exemption under Section 109(1)(A) of the Tax Code, as amended.

VA1-356-Ze21 OCT 1 3 2521

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of its Raw and Uncooked Meat Pr.dus is, which had undergone the simple processes of In view of the foregoing, we h&reby confirm your opinion that the sale by SMFI

preparation and preservation, which are stili considered food products in their original state, is exempt from VAT pursuant to Section 109(1)(A) of the Tax Code, as amended.

However, if upon investigation, it will be disclosed that the facts are different, then this This ruling is being issued on the basis of the foregoing facts as represented.

ruling shall be considered null and void.

0XcM1&a Very truly.yours,

K-1 Commissioner of Internal Revenue CAESAR R. DULAY 06355 T