VAT exemption of livestock and poultry feeds Philippines

By: Tax and Accounting Center Philippines

 As we have been aware, certain tax exemptions have been provided by law on some agricultural food products for basic commodities. On top of this exemption on primary agricultural products, Section 109(1)(B) of the National Internal Revenue Code, as amended, states that livestock and poultry feeds in the Philippines are exempted from value added tax (VAT) and hereunder:

“Section 109 – Exempt transaction

(1)(B) – Sale or importation of fertilizers, seeds, seedlings and fingerlings, fish, prawn, livestock and poultry feeds, including ingredients, whether locally produced or imported, used in the manufacture of finished feeds (except specialty feeds for race horses, fighting cocks, aquarium fish, zoo animals and other animals generally considered as pets)” (Emphasis supplied only)

In Revenue Regulations No. 16-2005 – Consolidated Value Added Tax (VAT) regulations, as amended, “specialty feeds” is defined as follows:

“Specialty feeds” refers to non-agricultural feeds or food for race horses, fighting cocks, aquarium fish, zoo animals, and other animals generally considered as pets”

In a recent clarification of the Bureau of Internal Revenue (BIR) under Revenue Memorandum Circular No. 55-2014 (RMC 55-2014), it noted that sale or importation of livestock and poultry feeds or ingredients used in the manufacture of finished products are exempted from VAT in the Philippines. Notably, some  ingredients of finished products could also be used for the production of food for human consumption.

Following such logical presentation, RMC 55-2014 provided for the requirements in order for livestock and poultry feeds to be exempted from VAT as follows:

To give effect to the legislative intent that only livestock and poultry feeds or ingredients used in the manufacture of finished feeds are exempted from VAT, it is hereby clarified that the sale or importation of ingredients which may also be used for the production of food for human consumption shall be subject to VAT. Thus, for the sale or importation of livestock and poultry feeds or ingredients used in the manufacture of finished  feeds to be exempted from VAT, there must be a showing that the same is unfit for human consumption or that the ingredient cannot be used for the production of food for human consumption as certified by the Food and Drugs Administration (FDA) Philippines.

In short, RMC 55-2014 clarified that livestock and poultry feeds would not be covered by the VAT exemption in the Philippines if the same is used for the production of food for human consumption, or the same is fit for human consumption. For the purpose, it may be a good option to secure certification from FDA and a BIR ruling for clarification on the application of VAT-exemption in the Philippines. Meantime, it could be worth to make a review of the internal classifications of your livestock and poultry feeds as to whether or not it falls within the clarification of the BIR.

Reference:

• Revenue Memorandum Circular No. 55-2014

Disclaimer: This article is for general conceptual guidance only and is not a substitute for an expert opinion. Please consult your preferred tax and/or legal consultant for the specific details applicable to your circumstances. For comments, you may please send mail at info(@)taxacctgcenter.org)

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