BIR Ruling No. 292-2022

REPUBLIC OF THE PHILIPPINES

DEPARTMENT OF FINANCE BUREAU OF INTERNAL REVENUE

QUEZON CITY

Sec. 109 (1) (A); RR No. 16-05 VAT Ruling No. 009-07

F. Ortigas Jr. Road, Ortigas Center NCR, Second District, Philippines Unit 1008 Taipan Place Condominium San Antonio, 1605, City of Pasig CHOOKS TO GO INC. JUN 1 3 2022 VAT-

Gentlemen: Attention: I Mark Oliver L. Trias Vice President

transaction under Section 109 of the National Internal Revenue Code of 1997 (Tax Code), as amended by Republic Act (RA) Nos. 8761, 9010, 9238, 9337, 9361 and further amended by RA No. 10963. roasted chicken of CHOOKS TO GO INC. qualifies as"a value-added tax (VAT) exempt This refers to your letter dated May 31, 2022 requesting for a ruling that the sale of

domestic corporation organized and existing under and by virtue of the laws of the Republic of the Philippines. As represented, CHOOKS TO GO INC. (formerly: Bounty Agro Ventures, Inc.) is a

meat based products and other poultry or meat derivativ'es or analogues, flour, feeds, feed description, goods and merchandise of every kind or description which may be incidental in products with poultry or meat base or poultry meat derivatives or analogues, flour, feeds, feed acquire, pledge, buy, sell, convey, assign and transfer poultry or meat products, or poultry of carrying out the business of the corporation. manufacturing, marketing or distributing goods, such as, poultry and meat products, other meais, and their by-products and other similar products of every class and description; to own. CHOOKS TO GO INC. is organized primari(y to engage in the business of

the customer on a take-out basis, as control passes to the castomer on the day the transaction takes place. Sale of goods are recognized when CHOOKS TO (O INC. sells the roasted chicken to

Herein is the process flow:

B. A Prior to roasting, 'store outlets do not add any other preservatives, additives or coloring; and Sorted according to size, marinated, packed, sealed and labeied, CHOOKS TO GO INC. delivers the dressed chicken t5' various outlets: When the dressed chicken meets the required specifications, weighed and

C Store outlets sell roasted chickens in e::her whole or chopped to customers.

G

VAT- 2 9 2 - 2 9 2 2

drying, salting, broiling, roasting, smoking, or stripping. Regulations (RR) No. 16-2005 which implements the said Section 109(1)(A) under Section 4.109-1(B)(1)(a), because allegedly, it involves a saie of an: agricultural food product that has undergone the simple processes of preparation or preservation for the market such as freezing. within the contempiation of Section 109(1)(A) of the Tax Code, as amended, and Revenue CHOOKS TO GO INC. claims that the foregoing sale is a VAT exempt transaction

Hence, the request for a conrirmatory ruling.

the simple processes of preparation or preservation for the market, such as freezing, drying. salting, broiling, roasting, smoking; or stripping, viz.: considers an agricultural or marine food product in its original state.even if it has undergone In reply, it is important to note that Section 109(1) A) of the Tax Code, as amended.

the value-added tax.: Subsection (2) hereof, the following transactions shall be exempt from "SEC. 109. Exempt Transactions. ---- (1) Subject to the provisions of

their original state, livestock and poultry of a kind generally used as, or yielding or producing foods for human consuirnption; and breeding stock and genetic material therefor: A Sale or importation of agricuitural and marine food products in

Products classified under this paragraph shall be considered in their (Emphasis supplied): original state even if they have undergoue the simple processes of preparation or preservation for the market, such as freezing drying, salting, broiling, roasting, smoking or stripping. x x x'

Section 4.109-1(B)(1)(a) of RR No. 16-2005 reiteratt:s the said Section 109(1)(A), viz.:

"SECTION 4.109-1.: VAT-Exempt Transactions

B) Exempt transactions.

transactions shall be exempt from VAT: 1 Subject to the provisions of Subsection (2) hereof, the following

Livestock shall inclide cows, bulls and calves, pigs, sheep, goats and rabbits. Poultry shall inciude fowis, ducks, geese and turkey. Livestock or poultry does not include fighting cocks, reke horses, zoo animals and other animals generally considered as pets. 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. (a) Sale or importation of agricultural and marine food products in

limited to, eels, trout. lobster, shrimps, prawns, oysters, mussels and Marine food product.s shall include fish and crustaceans, such as, but not clams.

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VAT

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

similar packaging methods." (Emphasis and underscoring supplied.) shrink wrapping in plastics, vacuum packing, tetra-pack, and other of preparation or preservation for the market, such as freezing drying. salting, broiling, roasting. smokixg or stripping, including those using advanced technological means of packaging, such as

of "preparation or preservation". I is noted, however, that under CHOOKS TO GO INC.'s Based on the foregoing provisions, "roasting" is considered under the simple processes

process flow, the dressed chicken is marinated before it is packed, sealed, labeled, and delivered to various outlets.

the outlets where it is roasted. There is no question that "rcasting", per se, without marinating. is considered a simple process of "preparation or preservation", as provided by the above law. Thus, the dressed chicken is soaked in a mixture of ingredients before it is delivered to

technological means of packaging" and can be construed as a value adding activity that can It is apparent, however, that the marinating process is outside the contemplation of "freezing. drying, salting, broiling, roasting, smoking or stripping, including those using advanced alter the taste of the product.

broiling and roasting, were introduced by R.A. No. 8241 and in the records of the Bicameral Conference Committee, the following deliberations were nade, viz.: We note that the other processes of preparation ard preservation for the market, i.e.

"MR. DAMASING: More or Less, Your Honor, can you give us just cry of the poor people rather than the Senate, few example that would show that the Houte is more receptive to the

"MR. JAVIER (E): Well, for example, your Honor, one is we were able being purchased mcistly by our workers. Like, sardines, canned fish, to get a presumptive tax credit for certain itenis - milk, sugar and then cooking oil. Then another, would be - food items which are we

of that roasted chicken." (Underscoring supp'ied.) because of traffic stops at ANDOK'S LECHON, and buys roasted chicken on a take-out basis NO VAT will be imposed on his purchase redefined the definition of agricultural prochicts. For example, it now includes roasting and broiling. So, if our worker who goes home at night

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 amt:nded. From the foregoing discussion of Congress, it is clear that the sale of chicken, which

and which is presumed to undergo a similar marinating provess as CHOOKS TO GO INC. outside the process of roasting, the roasted chicken of ANDOK'S LECHON was mentioned Although there is no mentiou of the process of marinating which is an activity that is

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VA292 -2022

provided for under Section 109(1)(A of the Tax Code,as anended, and as implemented under Section 4.109-1 (B) (1) (a) of RR No. 16-2005. Such being the case, the sale of roasted chicken is therefore exempt from VAT as

has undergone the simple process of roasting, will be offered as a menu item to customers who would dine-in, then it will be subject to the VAT on sale of service which is similarly imposed on restaurants and other eateries (VAT Ruling No.009-07 dated June 21,2007). which has undergone the simple process of roasting, is purchased on a take-out basis. Accordingly should CHOOKS TO GO INC.maintain a facility by which the chickenwhich It is to be emphasized however, that the exemption applies only if the roasted chicken,

if upon investigation, it will be disclosed that the facts are different, 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. teesama

K-1 Commissioner of Internal Revenue CAESAR R. DULAY 051826 C

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