BIR Ruling

January 23, 1968 Tolentino Law Office 310 Burke Bldg., Escolta Manila Attention: Mr . Albino G . Cordoba Gentlemen : This refers to you letter dated January 12, 1968, stating the following: "Our client, Mr. Anthony Ortaliz, on October 9, 1963, brought into the Philippines some articles, consisting of watches and jewelry from Hongkong, landed at the Manila International Airport. "He was prosecuted for violating Section 3602 of the Tariff and Customs Code, in Criminal Case No. 6208-P in the Court of First Instance of Pasay. Then forfeiture proceedings were instituted against the imported articles under Customs Case No. 778 (MIA S. I. No. 490). "He was acquitted in the Criminal Case, and the seizure proceedings were finally decided in his favor. The articles are now to be released by the MIA Collector of Customs upon payment of duties and taxes. "Attached hereto is the statement of the amount of duties and taxes being assessed, as well as the inventory and appraisal of the articles, by the MIA Collector of Customs. (Annexes "A" and "A-1"). "This letter now refers particularly to the amount of P32,068.50 being collected as 50% surcharge in lieu of consular invoice, and the amount of P141,147.21 being collected as sales tax, as shown in Annex "A". We understand these are under the Revised Internal Revenue Code, chargeable by the Bureau of Internal Revenue. "We submit that the imported articles are not subject to these charges, because they are not for commercial purposes. "The decision in Criminal Case No. 6208-P, wherein Anthony Ortaliz was acquitted, states in part: liblex "From the evidence of the Defense, testimonial and documentary, the following circumstances further point to the innocence of Anthony Ortaliz: xxx xxx xxx "(3) The pieces of jewelry and other articles which Anthony L. Ortaliz brought were not for him but for his father , Jose Ortaliz . They were intended by his father as wedding anniversary gift to his wife and gifts to his children . The truth of the matter was confirmed by the presence of Jose Ortaliz in the Manila International Airport on October 9, 1963, when Anthony L. Ortaliz arrived. Jose Ortaliz who had to fly from Bacolod was in the Office of Customs Collector Salvador Mascardo ready to pay the taxes due on the imported articles brought in by his son, Anthony L. Ortaliz. xxx xxx xxx "(5) Anthony L. Ortaliz is the Administrator of the Hacienda San Antonio de Padua, at La Carlota, Negros Occidental where he earns P1,000 a month. He belongs to a well-to-do family . His father , Jose Ortaliz , is a 'proprietor , sugar planter .' . . . "These findings of the court, upon which the acquittal in the criminal case was partly based, were on the basis of uncontradicted and undisputed testimony of both Anthony L. Ortaliz and his father, Jose Ortaliz, during the trial of the case. "These findings of fact, in a court decision that has now become final, must be binding. They clearly show a judicial conclusion that the imported articles were for the family of Anthony L. Ortaliz, whose economic and social position justify giving the imported articles as gifts to members of said family. Obviously, there was no commercial purpose and the importation was not commercial. "In view of these, we respectfully request your Office: (1) To direct and authorize the Collector of Customs at the MIA to collect and receive the corresponding compensating tax on the imported articles, instead of the sales tax and the surcharge in lieu of consular invoice being collected; (2) To indicate the rate and the amount of the compensating tax, on the basis of the appraised value and the duties and special import tax stated in Annexes "A" and "A-1"; and (3) To permit Anthony L. Ortaliz to pay the computed compensating tax within one (1) year, for which purpose he be allowed to file a surety bond for said amount." In reply, I have the honor to inform you that under the foregoing facts, the pieces of jewelry brought in by your client from Hongkong, except the watches, are subject to 50% compensating tax based on the landed cost thereof pursuant to Section 190 in relation to Section 184(b), both of the Tax Code. However, the watches are subject to 30% compensating tax based also on the landed cost thereof pursuant to Section 190 in relation to Section 185(b), both of the same Code. However, your request to permit your client to pay the compensating tax within one (1) year, cannot be granted for lack of legal basis. Under the law, compensating tax is required to be paid upon the withdrawal or removal of the imported articles from customs custody. Very truly yours, (SGD.) MISAEL P. VERA Commissioner of Internal Revenue