BIR Ruling

December 15, 1972 E. G. Tanjuatco & Associates Attorneys and Counsellors-at-Law 500-502 Merchants Bank Building Buendia Avenue Extension Makati, Rizal Attention: Mr . Emigdio S . Tanjuatco, Jr . Gentlemen : This refers to your letter dated September 14, 1972 stating that "A" Inc., a manufacturer of portland cement, availing of the tax exemption under Section 79-A of C.A. No. 137, as amended by R.A. No. 3823, imported tax-free, machineries for the manufacture of paper bags for the portland cement which it produces. In the event "A" Inc. sells these bag-making machineries to "B", a person not entitled to tax exemption after the expiration of the five-year tax exemption period, you would like to know whether "A" Inc. and/or "B" is liable to the taxes and duties which could have been levied had it not been for the tax exemption. acd In reply, I have the honor to inform you that under the foregoing circumstances, "B" is liable for the payment of the compensating tax if the machineries are bought for his own use, in accordance with the last paragraph of Section 190 of the Tax Code, as amended which provides: "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 or recipients shall be considered the importers thereof. The tax due on such articles shall constitute a lien on the article itself superior to all other charges or liens, irrespective of the possessor thereof." If the machineries are bought for resale, "B" is liable for the payment of the advance sales tax, in accordance with the last paragraph of Section 183(b) of the Tax Code. Very truly yours, MISAEL P. VERA Commissioner of Internal Revenue