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Madam:
This refers to your letter dated June 6, 2000 stating that you are a domestic
corporation, 100% owned by Chemical Industries of the Philippines, Inc. (CIP) and a
non-pioneer rm registered with the Board of Investments (BOI); that on October 25,
1991, you were granted by the BOI authority to import tax and duty-free one (1) unit
Beechcraft Super King Aire B200 with Serial No. BB-989, US reg. N5200 for
US$1,437,700; that due to severe losses from the very rst year of your operations the
Board of Directors and Stockholders in separate meetings held on January 6, 1997
resolved and approved the cessation of all business operations; that it was likewise
resolved to assign your assets, including the particular aircraft to CIP as liquidating
dividends and for CIP to assume all your obligations; that when you requested for a BIR
tax clearance as required by SEC you were told that the transfer of your assets to CIP
falls under the category of a "deemed sale" transaction and therefore subject to VAT;
that you explained to the BIR examiners assigned to your case that you have ceased
operations and CIP merely took your assets as sole sale owner in the form of
liquidating dividends.
Based on the foregoing, you are now seeking concurrence of this O ce that you
are not subject to VAT since the transfer of your assets was done in the course of
liquidation in settlement of equity claims of your sole stockholders, CIP. At the time of
your closure, CIP's equity claims had been grossly impaired by your massive annual
losses from the very first year of operations.
In reply, please be informed that your contention is not meritorious. Pursuant to
Section 106(B)(1) of the Tax Code of 1997 which provides that —
"Sec. 106. Value-added tax on Sale of Goods or Properties. —
"(B) Transactions Deemed Sale. — The following transactions
shall be deemed sale;