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RMC 07-94 PDF

The document summarizes a revenue memorandum circular that revokes an earlier ruling regarding the VAT status of water sales. It explains that the earlier ruling exempted fresh water sales from VAT by classifying water as an agricultural food product. However, the circular re-studies this and determines that water is actually a mineral rather than an agricultural product based on legal definitions. Therefore, the sale of water, whether bottled or supplied to vessels, is subject to a 10% VAT rate according to the tax code. This circular revokes the prior ruling that had exempted fresh water sales from VAT.

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156 views2 pages

RMC 07-94 PDF

The document summarizes a revenue memorandum circular that revokes an earlier ruling regarding the VAT status of water sales. It explains that the earlier ruling exempted fresh water sales from VAT by classifying water as an agricultural food product. However, the circular re-studies this and determines that water is actually a mineral rather than an agricultural product based on legal definitions. Therefore, the sale of water, whether bottled or supplied to vessels, is subject to a 10% VAT rate according to the tax code. This circular revokes the prior ruling that had exempted fresh water sales from VAT.

Uploaded by

Nathan Oranga
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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February 18, 1994

REVENUE MEMORANDUM CIRCULAR NO. 07-94

Subject : Value-Added Tax (VAT on Sale of Water).

To : All internal revenue officers and others concerned.

In BIR Ruling No. 017-88, dated February 1, 1988, it was held that sale
of fresh water is exempted from the 10% VAT, pursuant to Section 103(b) of
the National Internal Revenue Code, as amended by Executive Order No. 273,
otherwise known as the VAT Law, the pertinent portion of which reads as follows:

"In reply, please be informed that fresh water comes within the
purview of agricultural food products; hence, the sale thereof in all stages of
distribution is exempt from the value-added tax pursuant to Section 103(b)
of the Tax Code as amended by Executive Order No. 273."

In view of the criticisms against the validity of the aforementioned BIR


Ruling 017-88 and in light of the policy to strengthen and to improve enforcement
of the national internal revenue tax laws, a re-study thereof is imperative. cd i

Section 103(b), NIRC, provides:

"Sale or importation in their original state of agricultural . . . food


products . . ." shall be exempted from VAT.

Water is not agricultural product. Rather, it is a mineral. Thus -

Definition of minerals. — "The term 'minerals' shall mean all


naturally occurring inorganic substances (found in nature) whether in solid,
liquid, gaseous, or any intermediate state." (Sec. 257(b), NIRC, as
amended by Batas Pambansa Blg. 84).

Definition of mineral products. — "The term 'mineral products' shall


mean things produced and prepared in a marketable state by simple
treatment such as washing or drying, but without undergoing any chemical
change or process or manufacturing, by the lessee, concessionaire or owner
of mineral lands." (ibid).

Definition of agriculture. — "The cultivation of soil for food

Copyright 2017 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia (2017.1) 1
products or any other useful or valuable growths of the field or garden . . ."
(Bouvier's Law Dictionary, p. 167)

Definition of agricultural product. — "That which is the direct result


of husbandry and the cultivation of the soil. . . ." (ibid) cdasia

It is clear from the foregoing that the term agricultural product pertains to
organic products through cultivation of the soil, whereas the term mineral product
pertains to inorganic substances naturally occurring in nature. It follows that
water, being a substance naturally occurring in nature, is mineral rather than
agricultural product. Accordingly, water, may not legally be classified as
agricultural food product within the purview of Section 103(b), NIRC. Hence,
sale of water, whether in the form of bottled mineral water or water
delivered/supplied to inter-island and ocean-going vessels by persons engaged in
the business of supplying water to the aforesaid inter-island and ocean-going
vessels, shall be subject to 10% VAT, pursuant to Section 100(a), NIRC.

This Circular revokes VAT Ruling No. 017-88, dated February 1,


1988.

LIWAYWAY VINZONS-CHATO
Commissioner
Bureau of Internal Revenue

Copyright 2017 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia (2017.1) 2

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