BIR Ruling [DA-212-04]

April 12, 2004 BIR RULING [DA-212-04] Section 101 (B) (1) DA-628-99; 248-92 Office of the Provincial Governor Province of Aklan Kalibo, Aklan Attention: Mr. Florencio T. Miraflores Provincial Governor Gentlemen : This refers to your letter dated May 8, 2001 requesting exemption from the Value Added Tax (VAT) and the grant of duty free privileges for the donation of medical equipment and supplies (See Annex "1") from the World Medical Relief, Inc., Detroit, Michigan, to the Ibajay Disitrict Hospital, Ibajay Aklan a provincial government hospital. It is represented that your office had written the National Economic and Development Authority (NEDA) and was advised that its mandate is only with respect to duty exemption; that the 40-foot container of donations is intended for the Ibajay District Hospital which caters mainly to indigent patients; that your province is categorized as one of the country's depressed provinces; and that your province does not have any funds to pay the VAT which according to the broker could amount to P203,793.00. In reply, please be informed that pursuant to Section 101 (B)(1) of the Tax Code of 1997, gifts made to or for the use of the National Government or any entity created by any of the said Government shall be exempt from donor's tax. Such being the case, and since the donee is a provincial government hospital, the aforementioned donation is exempt from the payment of donor's tax pursuant to Section 101(B)(1) of the Tax Code of 1997. However, Section 109 of the same Code which enumerates the transactions exempt from VAT does not include importation of articles/goods consigned to any political subdivisions of the Government. Accordingly, since the donated medical equipment and supplies will come from abroad, the importation thereof shall be subject to the 10% VAT based on the total value used by the Bureau of Customs in determining tariff and customs duties, excise taxes, if any, and other charges, such tax to be paid by the importer prior to the release of the medical equipment and supplies from customs custody pursuant to Section 107(A) of the Tax Code of 1997 ( BIR Ruling No. 248-92 dated September 8, 1992 ). prcd Very truly yours, Commissioner of Internal Revenue By: (SGD.) JOSE MARIO C. BUAG Deputy Commissioner Legal and Inspection Group