Universal Motors Corporation

April 20, 2007 BIR RULING [DA-248-07] Rev. Reg. No. 25-2003; DA-583-2004 Universal Motors Corporation 2232 Don Chino Roces Avenue, Makati City 1200 Philippines Attention: Mr. Rodrigo T. Janeo, Jr. EVP-Finance & Treasurer Gentlemen : This refers to your letter dated July 24, 2006 requesting for a confirmation that the proposed supply of patrol/deployment vehicles to the Philippine National Police falls under the category of a "Special Purpose Vehicle" as defined in R.A. No. 9224 and Revenue Regulations No. 25-2003, hence, exempt from the excise tax. It is represented that UNIVERSAL MOTORS CORPORATION is studying the possibility of supplying 200 units of patrol/deployment vehicles to the Philippine National Police (PNP) to be exclusively used in its police operations; that the specifications of the proposed vehicle are indicated in Annex "A" of the letter; that based on the design/specifications of the vehicles and the purpose to which the same will be devoted, you opine that these proposed vehicles fall under the category of a special purpose vehicle as defined under Section 2 (g) of Revenue Regulations No. 25-2003; that the sale of such vehicle should be exempt from the payment of excise tax; and that the resultant savings from such exemption, translated basically into reduced prices shall ultimately redound to the benefit of the government, the buyer/end-user being the PNP. In reply, please be informed that Section (1) (f) of Republic Act No. 9224, also called "An Act Rationalizing the Excise Tax on Automobiles", dated August 29, 2003, which amended Section 149 of the Tax Code of 1997, provides as follows: "SEC. 1. Section 149 of the National Internal Revenue Code of 1997 is hereby amended to read as follows: xxx xxx xxx (f) Special purpose vehicle shall mean a motor vehicle designed for specific applications such as cement mixer, fire truck, boom truck, ambulance and/or medical unit, and off-road vehicles for heavy industries and not for recreational activities." Section 2 (g) of Revenue Regulations No. 25-2003 dated September 16, 2003 provides: AICTcE "SEC. 2. DEFINITION OF TERMS. For purposes of these Regulations, the following words and phrases shall have the meaning indicated below: xxx xxx xxx (g) SPECIAL PURPOSE VEHICLE shall refer to a motor vehicle, other than truck, cargo, van, jeep/jeepney/jeepney substitute, bus, single cab chassis as defined herein, designed for specific applications such as cement mixer, fire truck, boom truck, ambulance and/or medical unit, and off-road vehicles for heavy industries and not for recreational activities. For this purpose, "designed for specific applications" shall mean the motor vehicle is designed in such a manner that it can only be used strictly for the intended purpose for which it was manufactured." As gleaned from the above provisions, the proposed patrol/deployment vehicle as indicated in Annex "A" of your letter-query, is not covered by the definition of "special purpose vehicle" whether under the law or its implementing regulations. While it is true that the subject vehicles will be designed for specific application, i.e., exclusively for PNP's police operations, still it could not be considered as a "special purpose vehicle" as contemplated in RR 25-2003, implementing RA 9224. In view thereof, it is the opinion of this Office that your proposed sale of patrol/deployment vehicles to the Philippine National Police is subject to the payment of excise tax. Please be guided accordingly. Very truly yours, Commissioner of Internal Revenue By: (SGD.) GREGORIO V. CABANTAC Deputy Commissioner