BIR Ruling

April 30, 1974 The President Certeza Geophysical Exploration, Inc. 795 E. de los Santos Avenue Quezon City S i r : This refers to your letter dated January 10, 1974 requesting that the Magnetometer equipment which the Scintrex Limited of Canada is bringing into the Philippines to be used in discovering and locating oil and petroleum basins in the Philippines be exempted from the payment of compensating tax. aisa dc In reply, I have the honor to inform you that notwithstanding the fact that the magnetometer equipment will be re-exported after the work, the same is subject to the compensating tax prescribed in Section 190 of the Tax Code. In interpreting Section 190 of the Tax Code, the Court of Tax Appeals said: "If foreign contractors were to be allowed to bring to this country their plants, machineries and equipment free from compensating tax for use in their construction job here, and then re-export them back, it would be discriminatory against local contractors who are made to shoulder the compensating tax when they receive or purchase from without the Philippines machineries and equipment to be used in their construction projects here, contrary to the spirit and purpose of Section 190 of the National Internal Revenue Code, as amended. The fact that the machineries and equipment were re-exported abroad does not militate against the taxability thereof because they were actually used in the Philippines. The compensating tax is a tax on the privilege of using imported articles, not a tax on the articles." (The Shell Refining Co. (Philippines), Inc. vs. Jose B. Lingad, CTA Case No. 1395, prom. Oct. 12, 1966, citing the cases of 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) cdt Very truly yours, (SGD.) MISAEL P. VERA Commissioner of Internal Revenue TAN 1601-593-5