BIR Ruling No. 643-2020

REPUBLIC.OF THR PHILIPPINES

BUREAU OF INTERNAL REVENUE DEPARTMENT OF FINANCE

Quezon City

Section 1091T,NIRC

RR No. 15-2015; BIR RULING NO.101-17

NOV 2 42020 VAT-0643-20Z0

MONTENEGRO SHIPPING LINES, INC. Montenegro Corporate Center, along Diversion Road, Bolbok, Batangas City, 4200

Attention:Ms. Narissa Arellano Finance Manager

Gentlemen:

This refers to your letter dated September 8, 2020, requesting on behalf of Montenegro

Shipping Lines, Inc.for a Certificate of Value-Added Tax (VAT) Exemption on its

importation of one (1) Unit 2017-launched, 145.00 GT Fast Craft passenger vessel named MV

SHIMIZU 3 (TBR: MV CITY OF ROXAS), pursuant to Section 109 (1)(T) of the National

Internal Revenue Code (NIRC) of 1997, as amended.

Documents submitted show that Montenegro Shipping Lines, Inc., with Tax

and Exchange :Commission (SEC) under Company Registration No. Identification No. is a domestic corporation registered with the Securities that it is duly

accredited by the Maritime Industry Authority (MARINA) to engage in domestic shipping

business per MARINA Certification dated July 13. 2020 valid until July 21, 2023; that

Montenegro Shipping Lines, Inc. is currently importing one (1) Unit 2017-launched, 145.00 GT Fast Craft passenger vessel which is particularly described as follows:

Vessel's Name Class Flag Year Built Gross Tonnage Dimension Main Engine

that MARINA has approved the importation of the above passenger vessel in its letter dated

September 2, 2020 addressed to Montenegro Shipping Lines, Inc.; that per Sworn Statement

dated September 9, 2020 executed by Narrissa Arellano, Finance Manager of Montenegro

Shipping Lines, Inc., the subject passenger vessel cannot be manufactured domestically in

comparable quality, technology and at reasonable price; and that it is reasonably needed and

will be used exclusively by the company operations.

VAT-0643-2020

Montenegro Shipping Lines, Inc:/MV City of Roxas NOV 2 4 u-J

Page 2 of 3

In support of its request for exemption, Montenegro Shipping Linies, Inc. submitted

the following documents:

1..Certified true copy of the SEC Certificate of Registration, Articles of

Incorporation and By-Laws;

2 BIR Certificate of Registration; 3. Certified true copy of the Certificate of Registration with MARINA;

4 Certified true copy of the MARINA Authority to Import;

5 .Memorandum of Agreement dated August 11, 2020, executed by and

between Shimizu & Co. Ltd. and Montenegro Shipping Lines, Inc.; and

6. . Sworn Statement dated September 9, 2020.

In reply, please be informed that Section 109 (1)(T) of the NIRC of 1997, as amended,

provides as follows:

"Sec. 109.Exempt Transactions.

XXX XXX XXX

(1 Subject to the provisions of Subsection (2) hereof, the following transactions shall be exempt from the value-added tax.

XXX XXX XXX

(T aircraft, including engine, equipment and spare parts thereof for Sale, importation or lease of passenger or cargo vessels and

domestic or international transport operations;"

Based on:the above-cited provision, the importation, among others, of a passenger

vessel destined for domestic transport operations shall be exempt from VAT. In relation

thereto, Section 4.109-1 (B)(1)(t) of the Revenue Regulations.(RR) No. 16-2005, as amended

by RR No. 15-2015, which implements the above-quoted provision, provides:

"SECTION 4.109-1. VAT-Exempt Transactions.

XXX XXX XXX

(B) Exempt transactions.

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

following transactions shall be exempt from VAT:

XXX XXX XXX

aircraft, including engine, equipment and spare parts thereof for t Sale, importation or lease of passenger or cargo vessels and

domestic or international transport operations; Provided, however,

that the exemption from VAT on the importation and local purchase

of passenger and/or cargo vessels shall be subject to the

requirements on restriction on vessel importation and mandatory

vessel retirement program of MARINA. "

1 Renumbered by Republic Act No. 10378

Montenegro Shipping Lines, Inc./MV City of Roxas. Page 3 of 3 Vbv e 2 2

Hence, the importation of the said vessel by Montenegro Shipping Lines, Inc. is deemed compliant with the requirements on restriction on vessel importation and mandatory vessel retirement program of MARINA. Accordingly, the importation by Montenegro Shipping Lines, Inc. of "MV City of Roxas" shall be exempt from VAT pursuant to Section 109 (1)(T) of the NIRC of 1997, as amended. The VAT exemption, however, shall be subject to the strict compliance of.the conditions contained in the letter of approval issued by MARINA for the importation of the subject vessel. (BIR Ruling No. 101-17 dated March 3, 2017) passenger vessel and has been issued by MARINA with the required authority to be imported. It is noted that "MV City of Roxas" is a 2017-launched, 145.00 GT Fast Craft

if 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.

Very truly yours

1cus0u1

CAESAR R. DULAY Commissioner of Internal Revenue 038009

K,l-JAC 0