BIR Ruling [DA-458-05]

November 10, 2005 BIR RULING [DA-458-05] Office of the President Malacaang Palace Manila Attention: Mr. Manuel B. Gaite Deputy Executive Secretary Legal Affairs Gentlemen : This refers to your letter dated June 21, 2005 requesting for consideration, comment and recommendation regarding the proposed Executive Order by Department, of Trade and Industry (DTI) Secretary Juan Santos, which seeks to exempt local government units (LGUs) from the import prohibition of used motor vehicles provided under Executive Order 156, s. of 2002 and imposition of additional specific duty under EO 418, s. of 2005, provided that the importation of the same is through donation. In reply, please be informed that it is not within the discretion of this Office to consider the propriety of the proposed importation of used vehicles. However, with respect to the tax consequence relevant thereto, we hereby refer you to the following provisions of the Tax Code of 1997, to wit: "SEC. 101. Exemption of Certain Gifts . The following gifts or donations shall be exempt from the tax provided for in this Chapter: xxx xxx xxx (B) In the Case of Gifts Made by a Nonresident not a Citizen of the Philippines. (1) Gifts made to or for the use of the National Government or any entity created by any of its agencies which is not conducted for profit, or to any political subdivision of the said Government." xxx xxx xxx This, gifts in favor of the specific LGU are exempt from donor's tax. However, since the gifts/donation are expected to come from abroad, they shall be subject to the value-added tax on importation imposed under-Section 107(A) of the same Tax Code. Moreover, with respect to the imposition of additional specific duty, this Office has no jurisdiction to address the same as it is within the dominion of the Bureau of Customs (BOC). As BOC has already stated its position regarding this matter through its attached memorandum dated July 6, 2005, the same is no longer within the authority of this Office to comment thereon. DHESca Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service