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    Revenue Memorandum Circular No. 07-94

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    Lance Morillo
    The document summarizes a revenue memorandum circular regarding the value-added tax (VAT) on the sale of water. It revokes an earlier ruling that classified fresh water as an agricultural food product exempt from the 10% VAT, arguing that water is instead a mineral product based on legal definitions. As a mineral rather than agricultural product, the sale of water in any form, including bottled water and water supplied to vessels, is now subject to the 10% VAT rate according to the tax code.

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    Revenue Memorandum Circular No. 07-94

    Uploaded by

    Lance Morillo
    122 views2 pages
    The document summarizes a revenue memorandum circular regarding the value-added tax (VAT) on the sale of water. It revokes an earlier ruling that classified fresh water as an agricultural food product exempt from the 10% VAT, arguing that water is instead a mineral product based on legal definitions. As a mineral rather than agricultural product, the sale of water in any form, including bottled water and water supplied to vessels, is now subject to the 10% VAT rate according to the tax code.

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    BIR RMC

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    RMC 7-94

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    The document summarizes a revenue memorandum circular regarding the value-added tax (VAT) on the sale of water. It revokes an earlier ruling that classified fresh water as an agricultural food product exempt from the 10% VAT, arguing that water is instead a mineral product based on legal definitions. As a mineral rather than agricultural product, the sale of water in any form, including bottled water and water supplied to vessels, is now subject to the 10% VAT rate according to the tax code.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    122 views2 pages

    Revenue Memorandum Circular No. 07-94

    Uploaded by

    Lance Morillo
    The document summarizes a revenue memorandum circular regarding the value-added tax (VAT) on the sale of water. It revokes an earlier ruling that classified fresh water as an agricultural food product exempt from the 10% VAT, arguing that water is instead a mineral product based on legal definitions. As a mineral rather than agricultural product, the sale of water in any form, including bottled water and water supplied to vessels, is now subject to the 10% VAT rate according to the tax code.

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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(d), 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 -


    De nition 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).
    De nition 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 products or any


    other useful or valuable growths of the eld or garden . . ." (Bouvier's Law
    Dictionary, p. 167)
    De nition 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 classi ed 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
    CD Technologies Asia, Inc. 2018 cdasiaonline.com
    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

    CD Technologies Asia, Inc. 2018 cdasiaonline.com

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