BIR Ruling

February 16, 1977 Philippine Aerospace Development Corporation PADC Bldg., Domestic Airport Pasay City Attention: Mr . Marte U . Iglesias Gentlemen : This refers to your letter dated December 21, 1976 requesting for a ruling whether the sale of aircraft manufactured or assembled by that corporation is exempt from the payment of percentage tax. It appears that the Philippine Aerospace Development Corporation (PADC) was created as a body corporate and politic under the Office of the President; that among the purposes for which it was created include the design, assembly, manufacture and sale of all forms of aircrafts and aviation/aerospace devices, equipment or contraptions (See P.D. 286, as amended by P.D. 696); that four (4) private firms are presently negotiating for the purchase of 4 BN Islander aircrafts and 1 BO-105 helicopter from the PADC; and that what will be sold to the non-exempt entities are manufactured/assembled aircrafts by the PADC and not imported spare parts. In reply, I have the honor to inform you that under the foregoing circumstances, sale of the abovementioned aircrafts is exempt from the payment of the 7% tax prescribed under Section 186 of the Tax Code, pursuant to Section 10 and 14 of Presidential Decree No. 286, as amended by Presidential Decree No. 696, otherwise known as the "Charter of the Philippine Aerospace Development Corporation", pertinent portions of which provide: "SEC. 10. Exemptions . The Corporation shall be exempt from all national and local taxes, duties and fees for a period of seven (7) years from the date set under Section 14 hereof , or, in the case of a subsidiary defined under Section 8 hereof as eligible for such exemption from the date of its incorporation if such date is later than the date set under Section 14 hereof, provided that no subsidiary shall be exempt from payment of corporate income tax. "xxx xxx xxx." (Emphasis ours) "SEC. 14. Effectivity of the Revised Charter . This Decree shall take effect upon its approval. The Chairman of the Board, shall within thirty (30) days from the date of his appointment, call for an organizational meeting of the Board in order that corporate business may immediately be commenced. The new provisions on tax exemption, privileges granted to the corporation and its subsidiaries shall, however, be effective beginning July 1, 1974 ." (Emphasis ours) Very truly yours, (SGD.) EFREN I. PLANA Acting Commissioner of Internal Revenue TAN-1456-040-3