BIR Ruling

August 21, 1968 6th Indorsement Respectfully returned to the Honorable, the Undersecretary of Finance, thru the Commissioner, Bureau of Customs, Manila, the within papers relative to his 5th Indorsement dated July 16, 1968, bearing on the letter dated April 10, 1968 of Dr. Francisco J. Dy, on the proposed sale to the local market of the automobile, 1965 Mercedes Benz 220$, owned by Dr. A. C. Reyes, Asst. Director of Health Services of the World Health Organization. The interpretation by the Undersecretary of Foreign Affairs of the provisions of Section 22(g), Article VIII of the Host Agreement between the Republic of the Philippines and the World Health Organization, in his letter dated March 27, 1968 to the Department of Finance is not altogether correct. Section 22(g) Article VIII of the Agreement provides as follows: "One every three years have the right to import free of duty a motorcar it being understood that the duty will become payable in the event of the sale or disposal of such motorcar to a person not entitled to this exemption within three years upon it importation." It is very clear from the above-quoted provision that customs duty is payable only if the car is sold within three years from the date of importation, and they are not payable if sold after three years even in favor of a non-tax exempt person. It should be noted, however, that the exemption mentioned above refers to customs duty only. It cannot be construed to extend to internal revenue taxes. It may be stated that customs duties are taxes levied upon exports or imports. They are taxes but the latter cover wider fields. Therefore, the term tax is broader than the term "customs duties"; the latter being covered by the former. (Nolled, Taxation, 1965 Edition, p. 8) Considering that the term "duty" does not include taxes, it is obvious from the context of the Agreement that the advance sales tax or compensating tax, as the case may be, is not embraced within the exemption provided therefor. Hence, the exemption should not be inferred from the doubtful import of the language of the Agreement, but must clearly appear, either in express words or the necessary intendment of the Agreement. lexlib Accordingly, it is still believed that the car intended to be sold by Dr. A. C. Reyes is subject to the advance sales or compensating tax depending upon whether the car to be sold is intended for resale or personal use by the prospective purchaser pursuant to Sections 183(b) and 190 of the Tax Code. (SGD.) MISAEL P. VERA Commissioner of Internal Revenue