The Maritime Industry Authority (Marina) has raised the age limit of vessels that can apply for an endorsement from the Department of Finance (DOF) for availment of value-added tax (VAT) exemption under the National Internal Revenue Code (NIRC).
The new age requirement is included in Marina Advisory (MA) 2017-22, published on October 20 and which revises guidelines adopted under MA 2017-17.
MA 2017-22 states that only Marina-accredited domestic ship owners and operators may avail of the VAT exemption offered under Republic Act (R.A.) No. 9337, or NIRC.
Under the advisory, VAT exemption may be granted to qualified ship owners and operators for several transactions. These include the sale, importation, or lease of passenger vessels that are International Association of Classification Societies (IACS)-classed 500 gross tons (GT) and above and not more than 20 years old when acquired; and the sale, importation, or lease of high-speed passenger vessels that were not more than five years old when acquired.
VAT exemption may also be availed for the sale, importation, or lease of tanker vessels that were not more than 15 years old when acquired; and for the sale, importation, or lease of cargo vessels that are subject to existing rules and regulations.
The exemption may also be availed when selling and importing engine, equipment, and spare parts for passenger or cargo ships for domestic or international transport operations.
Previously, under MA 2017-17, passenger vessels had an age limit of 15 years old and need not be IACS-classed; the requirement for high-speed passenger vessels remains the same. For tankers, the previous age cap was 10 years old, and for cargoes, 15 years old.
MA 2017-22 states that the revised rules were adopted “in the interest of the service and after consultation with the Department of Finance, to ensure that only qualified domestic ship owner/operator may avail of the incentives granted under R.A. 9337, particularly the exemption from the payment of value-added tax on the sale, importation or lease of passenger or cargo vessels, including engine, equipment and spare parts thereof for domestic or international transport operations.”
All applications for issuance of the DOF endorsement for VAT exemption on the sale, importation, or lease of passenger or cargo vessels, including engine, equipment, and spare parts should be filed with the Domestic Shipping Service of the Marina Central Office.
The application for DOF Endorsement and Qualification Certificate must be filed simultaneously with that for the issuance of Authority to Import for the passenger or cargo vessel to be imported.
If importing an engine, equipment, and spare parts, a copy of the invoice shall be submitted together with the application. Payment of the processing fee for the issuance of DOF Endorsement and Qualification Certificate shall be according to existing policy on fees and charges.
Once Marina is satisfied with the requirements submitted and determines that the applicant is entitled to incentives under R.A. 9337, it will issue a Qualification Certificate attesting that the applicant is qualified to avail of VAT-exemption and endorse the application to the DOF.
Philippine Inter-island Shipping Association executive director Atty. Pedro Aguilar earlier cited several reasons why the group believed MA 2017-17 was flawed.
For one, Aguilar said, Marina was tying up the VAT exemption under R.A. 9337 to incentives, when the law expressly grants the exemption on the purchase of vessels/aircraft, spare parts, and others for domestic or international trade.
For another, the advisory put an age cap on vessels that was different from the requirement under R.A. 9337. The age caps in M.A. 2017-07, he noted, were the ones provided under R.A. 9295, or Domestic Shipping Act of 2004, for availing of the incentives.
Aguilar said that linking the VAT exemption under R.A. 9337 to the incentives for ships under R.A. 9295 was the same mistake made by the Bureau of Internal Revenue when it first issued the regulation on implementing this VAT exemption. He said the specific provision of R.A. 9337 granting VAT exemption is very clear and does not provide for any qualifications.
Aguilar said PISA members usually don’t take advantage of the VAT exemption under R.A. 9337 because they find it difficult to secure such exemption.- Roumina Pablo
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