BIR Ruling

August 8, 1969 Luzon Brokerage Corporation P.O. Box 591 Manila Attention: Mr . R . M . Millarez Director & Customs Consultant Gentlemen : This refers to your letter dated June 25, 1969 requesting information as to which value should be the basis of the advance sales tax in case of an importation invoiced as follows: Twenty (20) vacuum cleaners with accessories at $97.95 $1,959.00 Less: 30% discount 587.70 $1,371.30 Less: 20% discount 274.26 $1,097.04 Extra charge for 20 motors at $4.00 each 80.00 $1,177.04 Export boxing 75.51 Value F.O.B. factory $1,252.55 Add: Cartage 16.14 Ocean freight 173.38 Consular fee 10.00 Other shipping expenses 27.50 C & F value $1,479.57 Insurance local P54.05 It is represented that for purposes of the assessment of duty on the subject shipment and following its established procedure of not allowing unexplained discounts as deductions from the dutiable value of an importation, the Bureau of Customs has added back the above discounts of $587.70 and $274.26 to arrive at an appraised C & F value of $2,341.53, thus increasing the dutiable value of the shipment from P5,873.20 as declared in the entry to P9,263.29, both computed as follows: LexLib As Declared As Appraised Import invoice value $1,479.57 $1,479.57 Add: 30% discount 587.70 20% discount 274.26 C & F value $1,479.57 $2,341.53 Equivalence in pesos at P3.933 to $1.00 P5,819.15 P9,209.24 Add: local insurance 54.05 54.05 Dutiable value P5,873.20 P9,263.29 On the foregoing premise, you now pose the question as to whether on determining the landed cost of the shipment for advance sales tax purposes the invoice C & F value of $1,479.57 shown in the covering invoice or the appraised C & F value of $2,341.53 should be adopted as the starting basis, considering that Section 183 (b) of the National Internal Revenue Code which provides that the percentage taxes on imported articles are to be "based on the import invoice value thereof, certified to as correct by the Philippine Consul at the port of origin if there is any, including freight, postage, insurance, commission, customs duty, and all similar charges, . . . ." In reply, I have the honor to inform you that under the foregoing circumstances, the appraised C&F value of $2,341.53 is the correct starting basis of determining the landed cost for purposes of the advance sales tax. Discounts appearing in import invoices are not deductible for internal revenue purposes because to allow deductions of discount would result in lack of uniformity in the determination of the landed cost of articles. Moreover, the granting of such a privilege could encourage connivance between supplier and importer in affecting reduction of the actual cost of articles by merely claiming that discounts have been granted the importer. Accordingly, this Office concurs with the Bureau of Customs in not allowing discounts and deductions from the dutiable value of an importation not only for purposes of the customs duties but also for internal revenue purposes. LexLib Very truly yours, (SGD.) MISAEL P. VERA Commissioner of Internal Revenue