Phillipines - Tax notes: VAT on manning, crewing services

IN order that manning and crewing services may qualify for value-added tax (VAT) zero-rating under Section 4.108-5(b)(2) of Revenue Regulations (RR) 16-2005, the services must be rendered to persons engaged in business conducted outside the Philippines or to non-resident foreign clients not engaged in business who are outside the Philippines when the services are performed, and the fees paid are in acceptable foreign currency and accounted for in accordance with the rules and regulations of Bangko Sentral ng Pilipinas. (BIR Ruling DA-094-2007, February 15, 2007)

Considering that revenues received by domestic manning and crewing companies registered under the Philippine Overseas Employment Administration in the form of agency fees for manning and crewing services are rendered to non-resident foreign corporations and paid for in US dollars and inwardly remitted in accordance with the BSP rules and regulations, the same may automatically qualify for VAT zero-rating.

To qualify the sale of services to foreign clients as VAT zero-rated sales, the company must, however, be a VAT-registered taxpayer in accordance with Section 4.108-5(b) of RR 16-2005.