BIR Ruling

September 30, 1975 Mr. C. D. del Rosario Asst. General Manager National Power Corporation 161 Bonifacio Drive Port Area, Manila S i r : This refers to your letter dated September 15, 1975 stating that as a necessary consequence of that corporation's continuous power project constructions, it has periodically accumulated unserviceable construction, transportation and other equipment which were imported tax free by virtue of the corporation's tax exempt privilege; that due to the high cost of spare parts and repair costs to maintain and rehabilitate these equipment, the corporation is compelled to dispose of the same as scraps or junks. With the foregoing as a promise, you now request information as to whether the private purchaser or donee of the foregoing equipment would be required to pay taxes thereon. In reply, I have the honor to inform you that Sections 183(b) and 190 of the Tax Code contain identical provisions which state: "In the case of tax-free articles brought or imported into the Philippines by persons, entities or agencies exempt from tax which are subsequently sold, transferred, or exchanged in the Philippines to non-exempt private persons or entities, the purchasers shall be considered the importers thereof." Consequently, if the purchaser of the construction, transportation and other equipment sold by that corporation, buys the said articles for the purpose of resale, then the articles shall be subject to the advance sales tax. However, if the purchaser is buying the same articles for his personal use and not for sale, barter or exchange, the same shall be subject to the compensating tax. The rate of tax applicable shall depend upon the classification of the articles. Very truly yours, (SGD.) EFREN I. PLANA Acting Commissioner of Internal Revenue TAN 1450-040-5