BIR Ruling No. 421-2022

BUREAU OF INTERNAL REVENUE REPUBLIC OF THE PHILIPPINES DEPARTMENT OF FINANCE National Office Building Quezon City

Section 15g of RA No.9513 RR No.16-05,as amended BIR Ruling No.OT-0290-2020 OT- 421-2022 OCT 2 7 2022

31B Pearl of the Orient Tower Ermita, Manila CARPIO&DUTERTE LAWYERS Manila Office (Liaison Office 1240 Roxas Blvd., cor. Arquiza St.

Attention: Atty. Deo S.Zambrano Gentlemen:

implemented by Section 4.108-5 of Revenue Regulations (RR) No. 16-2005 in relation to Section 6(b) of Republic Act (RA) No.9367 otherwise known as the Biofuels Act of 2006. derivative products to be used in the production and manufacture of biodiesel chemical, pursuant to Section108 (B(3 of the National Internal Revenue Code (Tax Code of 1997, as amended, "Company" or "Archemicals) for tax exemption ruling confirming that the Company shall be exempt from value-added tax (VAT) on its purchases of materials and all kinds of similar and This refers to your request on behalf of Archemicals Corp. (hereinafter referred to as the

biofuel manufacturer under JAO No. : Board of Investments BOn as a Renewable Energy Developer of Biomass Resources of 1987, as amended. It is also registered with the Department of Energy (DOE as a Renewabie Energy Developer (RE Developer) of Biomass Energy Resources by virtue of its registration as a (Manufacturer of Biodiesel) in accordance with the provisions of the Omnibus Investments Code Documents submitted disclose that Archemicals is a corporation duly registered with the Series of 2008 of RA No. 9367.

facilities. It expressly provides that: confirming the Company's entitlement to zero-rated VAT on its purchases of local supply of goods. properties and services needed for the development, construction and installation of its plant It appears that on December 10,2019,this Bureau issued BIR Ruling No.0780-2019

Brgy. Natumolan, Tagoloan, Misamis Oriental. " being a DOE-certified RE Developer, should not pass on 12% VAT to the latter's purchases of goods and services that will be used by it in its development, construction and installation of power plant facilities in "[T]he suppliers/sellers of goods and services of Archemicals Corp., it

the sale transaction is subject to VAT at zero percent (0%), the VAT paid on the technical suppliers who are duly registered with the Philippine Economic Zone Authority (PEZA) or PEZA importation of raw materials can be refunded pursuant to Section 112 (A) of the Tax Code of 1997, as amended. registered business enterprises(RBE). In a letter dated June 1,2022, this Bureau provided that since In the course of its operations, Archemicals has made purchases of raw materials from

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is not readily obtainable and will take a substantial amount of time and resources on the part of the Company Hence, this request for ruling which the Company would like to present to its current and future suppliers to ensure that VAT will not be passed on to the Company for all succeeding purchase of raw materials. However, while entitled, the refund mechanism provided for in the above cited provision

In reply thereto,please be informed that Section 6(b of RA No.9367 provides

production, distribution and use of locally-produced biofuels at and SEC. 6. Incentive Scheme. above the minimum mandated blends, and without prejudice to enjoying regulations, the following additional incentives are hereby provided applicable incentives and benefits under existing laws, rules and under this Act. To encourage investments in the

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b) Value Added Tax

The sale of raw material used in the production of biofuels such as, but not limited to, coconut, jatropha, sugarcane, cassava, corn, and sweet sorghum shall be exempt from the value added tax.

exempt from VAT.In effect,VAT should not be imposed on the purchase by Archemicals of raw materials used in the production of biodiesel. From the foregoing, the purchase of raw materials used in the production of biofuels' are

In the same vein,Section 15 (g of RA No.9513,provides, to wit:

proportion to and to the extent of the RE component, for both power and the BOI, shall be entitled to the following incentives: Developers of renewable energy facilities, including hybrid systems, in non-power applications, as duly certified by the DOE, in consultation with "SEC. 15. Incentives for Renewable Energy Projects and Activities.--RE

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purchases of local supply of goods, properties and services needed for the development. construction and installation of its plant facilities. All RE Developers shall be entitled to zero-rated valuc-added tax on its

including but not limited to the services formed by subcontractors and/or contractors."(Emphasis and underscoring supplied) This provision shall also apply to the whole process of exploring and developing renewable energy sources up to its conversion into power,

on their local purchases of goods, properties and services needed for the development, construction and installation of their power plant facilities and the whole process of exploring and developing Clearly,RA No.9513 intended to exclude RE Developers from the imposition of 12% VAT

thermal and power generation, with quality specifications in accordance with the Philippine National Standards. (Section 3 [f] of RA No. 9367) 1 Biofuel shall refer to bioethanol and biodiesel and other fuels made from biomass and primarily used for motive.

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OT 421-2022 OCT 2 7 2022

performed by subcontractors and/or contractors. renewable energy sources up to its conversion into power, including but not limited to the services

performed by contractors and subcontractors. This is one of the fiscal incentives given by the utilize the renewable energy resources in the country. subject to zero-rated VAT provided that those are needed for the development, construction and installation of their power plant facilities, as well as the whole process of exploration and development of the renewable energy to its conversion into power, including the services government to encourage RE Developers including contractors and subcontractors to develop and Under said law, the local purchases of goods,properties and services by RE Developers are

derivative products to be used in the production and manufacturing of biodiesel chemical in accordance with the Company's Certificate of Registration No. F the services performed by subcontractors and/or contractors.2 Developer, should not pass on 12% VAT to its purchases of materials and all kinds of similar and the DOE as these are exempt from VAT. This includes the whole process of exploring and developing renewable energy sources up to its conversion into power, including but not limited to Accordingly, the suppliers/sellers of goods and services of the Company it being a RE + duly issued by

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

Very truly yours.

K-1 LARRY M.BARCELO Assistant Commissioner 00009759 /Legal Service O

2 BIR Ruling Nos. 78-2010 dated September 23, 2010 and 358-17 dated August 9, 2017

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