BIR Ruling

April 29, 1975 Villareal, Matic & Associates Law Offices 140 Retiro Street Quezon City Attention: Mr . Vicente Velasquez, Jr . Gentlemen : This refers to your letter dated November 27, 1974 requesting clarification on behalf of one of your clients, a registered tourism enterprise, whether the motor vehicle (the taxes of which has not been paid) which it intends to purchase for the service of tourist, will be subject to tariff duties and/or compensating tax. In reply, I have the honor to inform you that Section 8(e) of Presidential Decree No. 535 provides as follows: "Sec. 8. Incentives Available to a Registered Tourism Enterprise . "(a) . . . "(e) Importations of machinery and equipment, and spare parts shipped with such equipment shall not be subject to tariff duties and compensating tax within seven years from the date of registration with the Authority subject to the other provisions in Section 7(d) of Republic Act No. 5186," which provides as follows: "Sec. 7. Incentives to a Registered Enterprise . "(d) Tax Exemption on Imported Capital Equipment . Within seven years from the date of the registration of the enterprise, importation of machinery and equipment, and spare parts shipped with such machinery and equipment, shall not be subject to tariff duties and compensating tax; Provided, That said machinery, equipment and spare parts: (1) are not manufactured domestically in reasonable quantity and quality at reasonable prices; (2) are directly and actually needed will be used exclusively by the registered enterprise in the manufacture of its products, unless prior approval of the Board is secured for the part-time utilization of said equipment in non-registered operations to maximize usage thereof; (3) are covered by shipping documents in the name of the registered enterprise to whom the shipment will be delivered direct by customs authorities; (4) the prior approval of the Board was obtained by the registered enterprise before the importation of such machinery, equipment and spare parts; and (5) the registered enterprise chooses not to avail of the privileges granted by Republic Act Numbered Thirty-one hundred seventy-seven, as amended. If the registered enterprise sells, transfers or disposes of these machinery, equipment and spare parts without the prior approval of the Board within five (5) years from the date of acquisition, the registered enterprise shall pay twice the amount of the tax exemption given it. However, the Board shall allow and approve the sale, transfer, or disposition of the said items within the said period of five (5) years if made: (1) to another registered enterprise; (2) for reasons of proven technical obsolescence; or (3) for purposes of replacement to improve and/or expand the operations of the enterprise." From the foregoing provisions of law, it is clear that in order that your client can enjoy the exemption from the payment of compensating tax on the motor vehicle it intends to purchase, it must get the prior approval of the Philippine Tourism Authority and it must comply with the other requirements of the aforequoted provisions of law. There being no showing that your client complied with the requirements of the law, this Office cannot issue a categorical ruling on your request. cdta With respect to customs duties on the said motor vehicle to be purchased by your client, it is suggested that you direct your inquiry to the Commissioner of Customs, the official charged with the administration of customs laws. Very truly yours, (SGD.) MISAEL P. VERA Commissioner of Internal Revenue TAN 1601-593-5