BIR Ruling [DA-160-96]

May 3, 1996 BIR RULING [DA-160-96] The Board of Investments Industry & Investments Bldg. 385 Gil J. Puyat Avenue Makati City Attention: Ofelia V. Bulaong Gentlemen : This refers to your letter dated May 2, 1996 stating that the Philippine Government is actively competing to host General Motors (GM) proposed manufacturing facility which is intended to be a production base for its regional assembly operation in the ASEAN region; that the proposed US$1 billion automotive project involves the production of passenger cars and is expected to generate employment of 2,000 employees and an indirect employment of 30,000 more in supporting industries that is also expected to locate once the Philippines is chosen as site; and that the Philippine Government, in its efforts to entice the group to consider the Philippines in its siting decision has packaged a set of fiscal and non-fiscal incentives to signify our strong bid to host their project. In connection therewith, you are requesting, in effect, for information as to what business taxes are payable by GM on its proposed manufacturing/assembly operations in the Philippines. In reply thereto, please be informed that if GM will be importing completely knocked-down (CKD) parts of automobiles destined for assembly/manufacturing in the Philippines and the addition of Philippine-sourced components as determined by the Board of Investments, GM will be subject to VAT under Section 101 (a) of the Tax Code, as amended but not to the ad valorem tax under Section 149 of the Tax Code which is imposed only on fully assembled vehicles classified as automobiles. However, in addition to the VAT imposed under Section 100 (a) of the Tax Code, as amended, the ad valorem tax shall be collected only upon removal of the fully assembled units from its factory premises. [BIR Ruling No. 377-93 dated September 20, 1993] Very truly yours, (SGD.) ALICIA P. CLEMENO Assistant Commissioner (Legal Service)