BIR Ruling [DA-147-00]

March 10, 2000 BIR RULING [DA-147-00] Hon. Robert Z. Barbers Senator of the Republic of the Philippines Rm. 502 5th Floor, New GSIS Headquarters Building Financial Center Roxas Boulevard Pasay City S i r : This refers to your letter dated January 17, 2000 addressed to the Undersecretary Solomon S. Cua of the Department of Finance, in connection with the ongoing Medical Mission to Surigao del Norte, wherein doctors from the Philippine Medical Society of Northern California brought in, among others, one (1) used Anesthesia Machine, which will be donated to the CARAGA Regional Hospital after the mission. LibLex Based on the foregoing, you now request for a ruling that the said medical equipment be exempt from the payment of value-added tax. In reply, please be informed that this Office takes due notice of the noble endeavor of the Philippine Medical Society of Northern California and commends its generosity by donating one (1) used Anesthesia Machine to the CARAGA Regional Hospital. However, in this jurisdiction, tax exemptions are construed in strictissimi juris against the taxpayer. Thus, a taxpayer who claims tax exemption must be able to justify his claim by the clearest grant of organic law or statute. In the instant case, the donation of the Philippine Medical Society of Northern California partakes the nature of an importation. In this connection, it is well settled in Section 107(A) of the Tax Code of 1997 that: "SEC. 107. Value-added Tax on Importation of Goods . "(A) In General . There shall be levied, assessed and collected on every importation of goods a value-added tax equivalent to ten percent (10%) based on the total value used by the Bureau of Customs in determining tariff and customs duties, plus customs duties, excise taxes, if any, and other charges, such tax to be paid by the importer prior to the release of such goods from customs custody: Provided, That where the customs duties are determined on the basis of the quantity or volume of the goods, the value-added tax shall be based on the landed cost plus excise taxes, if any." cdll Regrettably, the provisions on VAT exemptions under Section 109 of the Code did not include exemption of transactions similar to the case at hand. Thus, this Office is unable to grant your request for lack of legal basis. Taking a cue from the wisdom of your request, we believe that it is high time that the pertinent provision of law should be amended taking into consideration the status and financial capacity of the donee. We do recognize that a donation would go to waste if the donee who is unaware of the tax consequence of a donation is financially incapable of paying the tax burden. Thus, if the good Senator would deem it fit to introduce legislation to address this situation, rest assured that this Office would be more than glad to assist or support the same. The above notwithstanding, said importation is exempt from the donor's tax since it is donated to the CARAGA Regional Hospital, an entity created by the National Government which is not conducted for profit, pursuant to Section 101(B)(1) of the Tax Code of 1997. llcd Very truly yours, Commissioner of Internal Revenue By: (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner (Legal and Enforcement Group)