BIR Ruling [DA-094-04]

March 1, 2004 BIR RULING [DA-094-04] Sections 109 & 149 BIR Ruling No. 075-89 Mr. Fred P. Paat 152 San Jose, Sto. Tomas Pangasinan S i r : This refers to your letter dated August 12, 1999 indorsed to this Office by the Office of the President on January 15, 2000 requesting in effect for a reduced tax for your 14 year-old car. Documents show that you are a returning resident with an approved Non-quota No. 13 (G) by the Consulate of the Republic of the Philippines; that you are the owner of a motor vehicle described as follows: Make: Mercedes Benz 300SD Sedan 4D Color: Manganese Brown Type of Fuel: Diesel Engine No.: 5 Cyl. Turbo Diesel Year Model: 1984 Vehicle Identification No.: WDBAB33A6EA108448 Plate No.: FCPAAT that it has a trade-in value in the amount of $4,750.00; that the Bureau of Import Services (BIS) quoted your 14 year-old car at P744,438.39 and assessed you the following taxes: Duty - P214,335.80 Ad Valorem Tax - 413,586.42 Value Added Tax - 116,556.17 Total P744,478.39 ========= In reply, please be informed that Section 109, more particularly (h) and (i) of the Tax Code of 1997, the following shall be exempt from the value-added tax, viz : "(h) Importation of personal and household effects belonging to the residents of the Philippines returning from abroad and nonresident citizens coming to resettle in the Philippines: Provided, That such goods are exempt from customs duties under the Tariff and Customs Code of the Philippines; (i) Importation of professional instruments and implements, wearing apparel, domestic animals, and personal household effects ( except any vehicle , vessel, aircraft, machinery, other goods for use in the manufacture and merchandise of any kind in commercial quantity) belonging to persons coming to settle in the Philippines, for their own use and not for sale, barter or exchange, accompanying such persons, or arriving within ninety (90) days before or after their arrival, upon the production of evidence satisfactory to the Commissioner, that such persons are actually coming to settle in the Philippines and that the change of residence is bona fide . . . " (emphasis ours) Moreover, Section 6 of Revenue Regulations No. 14-97 implementing Section 149 of the Tax Code of 1997 provides that "SEC. 6. Rates and Bases of Ad Valorem Tax . There shall be levied, assessed and collected an ad valorem tax on automobiles based on the manufacturer's or importer's selling price, net of excise tax and value-added tax, in accordance with the following schedules: a. Gasoline-fed engines Engine Displacement (in cc.) Tax Rate up to 1600 15% 1601 to 2000 35% 2001 to 2700 50% 2701 or over 100% b. Diesel-fed engines Engine Displacement (in cc.) Tax Rate up to 1800 15% 1801 to 1300 35% 2301 to 3000 50% 3001 or over 100% Provided, that in the case of imported automobiles not for sale, the tax imposed herein shall be based on the total value used by the Bureau of Customs in determining tariff and customs duties, including customs duty and all other charges plus ten percent (10%) of the total thereof." Pursuant to Section 7(c) of the said Regulation, the ad valorem tax due on imported automobiles not for resale shall be computed in the following manner: Value as determined by BOC plus customs duty Pxxx Add: 10% mark-up on total value xxx Total amount subject to ad valorem tax Pxxx Multiplied by applicable AVT rate xx% Ad valorem tax due thereon Pxxx ==== Furthermore, the same Section provides that "Under existing rules and regulations, the value of the automobile at the time of sale, transfer, or exchange should be based on its depreciated value of 10% each year but in no case shall the allowable charge for depreciation be more than 50% of the original cost or value. The cost of any accessories or optional equipment such as car airconditioner, radio, wheel covers, mag wheels, or any other attachments installed on the unit or units removed or sold shall form part of the tax base, or selling price. SEIcAD In cases where these accessories or equipment are installed outside the production or assembly plant but the costs of such installations form part of the expenses of the assembler, all subsequent billings therefor by the assembler to the dealer or customer shall form part of the taxable base." In view of the foregoing, your motor vehicle (Mercedes Benz 300SD Sedan 4D) is subject to value-added tax pursuant to Section 107 in relation to Section 109 paragraphs (h) and (i) of the Tax Code of 1997 and to the ad valorem tax on automobiles based on the manufacturer's or importer's selling price, net of excise tax and value-added tax pursuant to Section 149 of the same Code. However, it is not within the jurisdiction of this Office to rule on your request for reduction of your payment of customs duty. Please be guided accordingly. Very truly yours, Commissioner of Internal Revenue By: (SGD.) JOSE MARIO C. BUAG Deputy Commissioner Legal & Inspection Group