Fortun Narvasa Salazar Law Offices

February 13, 2008 BIR RULING [DA-087-08] Fortun Narvasa Salazar Law Offices 23/F, Multinational Bancorporation Centre 6805 Ayala Avenue, Makati City Attention: Attys. Dickson B. Berberabe & Charisse C. Corales Gentlemen : This refers to your letters dated October 2, 2006 and August 21, 2007 requesting confirmation of your opinion that Asian Development Bank (ADB) is an international organization exempt from any and all taxes imposed by the Philippine government and its political subdivisions, such that, as a purchaser of movable properties (consisting of machinery and equipment), which properties were subsequently transferred to another purchaser, the tax declarations over said property need not be transferred to ADB, but instead, may be transferred directly from ADB's seller to ADB's purchaser. It is represented that Primo Oleochemicals, Inc. ("Primo") obtained several loans from a group of entities ("the Lenders") in order to finance the construction and operation of an oleochemical plant located in Barangay Osmea, Municipality of Jose Panganiban, Province of Camarines Norte. To secure the different loans obtained and to be obtained by Primo from the Lenders, a Joint Mortgage Indenture (JMI) dated July 5, 1994, among other documents, was executed by and among Primo and the Lenders. Primo mortgaged, as security for the different loans it obtained, the equipment and machinery of the oleochemical plant. Primo failed to repay its loans to the Lenders that led to the institution of a foreclosure proceeding over the machinery and equipment, among others. On March 31, 2003, the properties covered by the JMI were sold at a public auction. At said auction sale, ADB purchased the subject machinery and equipment. However, from the time of ADB's purchase until the time of its sale of the machinery and equipment, ADB failed to secure the transfer of the tax declarations over the machinery and equipment to its name. cITCAa With the subsequent sale of the machinery and equipment to another purchaser, the latter requested that the Provincial Treasurer of Camarines Norte transfer the tax declarations over the machinery and equipment which are currently under the name of Primo, directly to its name, without said tax declarations being transferred to ADB, on the ground that there is no need to transfer the same to ADB's name considering that ADB is tax-exempt. The Provincial Treasurer, however, refused to transfer said tax declarations to ADB's purchaser on the ground that ADB should first pay the taxes due on said machinery and equipment. Hence, this request for confirmation of the tax-exempt status of ADB. In reply, please be informed that transfer of tax declarations covering movable properties, i.e., machinery and equipment, resulting from a sale transaction, does not require the issuance of a Tax Clearance (TCL) or a Certificate Authorizing Registration (CAR). As such, parties to the disposition of these movable properties need not present proof of payment of internal revenue taxes, if there is any due on the transaction, in order for the parties to transfer the tax declarations covering the same. Thus, in relation to your request, this Office does not see the need to confirm the tax-exempt status of ADB for purposes of transferring the subject tax declarations to the purchaser. For the said purpose, however, it is advised that you direct your concern to the Bureau of Local Government Finance (BLGF) which has jurisdiction over matters relative to the taxability of transfers of tax declarations. Said office is in a better position to render an opinion on issues involving local taxation. Please be guided accordingly. CAacTH (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service