BIR Ruling

November 28, 1977 Mr. Oktav Tinaz President, Oktrans Handel-GMBA c/o Major Jose Solis Mapping Center, AFP Headquarters Camp Aguinaldo, Quezon City S i r : This refers to your letter dated November 17, 1977 requesting that your importation of a used company car, Mercedez 116/450 SE with Plate No. S-CY 4579 which you intend to use during your temporary stay in the Philippines, be exempt from the payment of compensating tax upon filing of a bond. It is represented that you are businessman of Turkey nationality who intend to put up a business establishment in the Philippines; that importation of the abovementioned car will be to your convenience in transacting business matters while staying in the Philippines, that said car will be consigned to Major Jose Solis; and that upon your departure in the Philippines, the same will be re-exported abroad. In reply, I regret to inform you that your request cannot be granted for lack of legal basis. The fact that the above-mentioned car will be used only during your temporary stay in the Philippines and is intended to be re-exported abroad upon your departure does not exempt you from the payment of the compensating tax due thereon. This is so, because the purpose for which the car is being brought into the Philippines is actually for used. The compensating tax is a tax on the privilege of using imported articles, not a tax on the articles. (The Shell Refining Company (Phil.) vs Jose B. Lingad, CTA Case No. 1394, prom. Oct. 12, 1966, citing the case of the international Business Machine Corp. vs. Collector, 98 Phil. 598, prom. March 6, 1956 and Masbate Consolidated Mining Co. vs. Collector, 98 Phil. 442, prom. Feb. 27, 1956) In view thereof, you are subject to the payment of compensating tax in accordance with Section 204 (formerly Section 190), in relation to Section 195 (formerly Section 184-A), both of the Tax Code of 1977. However, if as represented, the aforesaid motor vehicle is a 1974 model (3 year old model), it is entitled to depreciation allowance of 50% for purposes of the compensating tax pursuant to Department Order No. 13-62 which provides in part, as follows: "xxx xxx xxx "In ascertaining, estimating and determining the negotiable value of car of US brands and manufacture, appraisers may take into account, but shall not be admitted to, the retail factory price published in Red or Blue Book. "2. The published retail factory price as published the Red-and Blue Book shall be entitled to depreciation allowance for the applicable model year of all makes of cars regardless of country where manufactured, in accordance with the following table: "Current Year Models 10% One Year Old Models 25% Two Year Old Models 40% Three Year Old Models 50% Four Year Old Models 60% Five Year Old Models 70% Six Year Old Models 80% All Old Models 90% "xxx xxx xxx" Very truly yours, EFREN I. PLANA Acting Commissioner of Internal Revenue TAN P4519-F2828-A-8