BIR Ruling

May 30, 1966 Mr. Conrado P. Cruz 190 A. Bonifacio Street Mandaluyong, Rizal S i r : This refers to your letter dated February 24, 1966 requesting information on the following queries: "1. In cases where a used car was brought to the Philippines from a foreign country for personal use, is the allowable depreciation for purposes of taxation computed on the purchase price of the car or at the total cost, that is, purchase price plus freight charges, insurance, and other charges? prll "2. Suppose the purchase price of the car is known, will it be the basis of the computation in order to obtain the depreciation that is allowable? "3. What are the taxes supposed to be imposed on cars brought here from a foreign country which are already of second hand nature and deemed to be for personal use only?" In reply thereto, I have the honor to inform you that for purposes of computing the allowable depreciation of said used car, the pertinent provisions of the Department of Finance Order No. 13-62 dated April 18, 1962 are quoted hereunder as follows: "In ascertaining, estimating and determining the dutiable value of cars of US brands and manufacture, appraisers may take into account, but shall not be limited to, the retail factory price published in the Red or Blue Book. "2. The published retail factory price is published in the Red or Blue Book shall be entitled to depreciation allowance for the applicable model year of all makes of cars, regardless of country where manufactured, in accordance with the following table: Current Year Models 10% One Year Old Models 25% Two Year Old Models 40% Three Year Old Models 50% Four Year Old Models 60% Five Year Old Models 70% Six Year Old Models 80% All Old Models 90% "Applicable only after the end of the first quarter of the year. No depreciation allowed on advance year models. cdt "3. The above depreciation allowance shall apply to all extra equipment or accessories already installed in a car at the time of importation." Depreciation allowance should only be granted to cars imported for personal use, whether used or brand new, and shall not apply to cars imported for commercial or business purposes. (6th Ind., dated April 23, 1963, of the Sec. of Finance to the Com. of Internal Revenue) Second hand cars brought or imported to the Philippines for personal use are subject to the compensating tax at the rate of 50% if the total landed cost of the car does not exceed P7,000.00; 75% if it exceeds P7,000 but does not exceed P10,000; 100% if it exceeds P10,000, pursuant to Section 190, in relation to Section 184(a), both of the Tax Code. The term "total landed cost", in the case of second hand cars, means the Blue Book Value thereof, plus freight, postage, insurance, commission and all similar charges incurred until the release of the car from customs custody. (B.I.R. Ruling, dated August 6, 1957) cdta Very truly yours, (SGD.) MISAEL P. VERA Commissioner of Internal Revenue