BIR Ruling [DA-513-98]

November 19, 1998 BIR RULING [DA-513-98] The Phoenix, Inc. 8/F YMCA International, A. Villegas St. Ermita, Manila Attention: Mr . Pedro S . Barrientos Atty . -in-Fact/Consultant Gentlemen : This refers to your letter dated June 1, 1998 requesting for exemption from the donor's and value-added taxes on the donation of eight (8) units motor vehicles by a local government of Japan in favor of the City Government of Cebu. LLjur It appears that the eight (8) subject motor vehicles are used Powered Isuzu ELF all with engine capacity of 2500cc, 120 horsepower, and 4 cylinders; that the said vehicles are part of the property inventory of a certain local government of Japan, thru Governor Yukio Aoshima, represented by Phoenix, Inc. (Japan); that, they were brought to the Philippines as tax-free articles under and by virtue of the Japanese Government's diplomatic status; and that said vehicles were donated by the said Japanese local government by way of assistance for the maintenance of the clean and green program of the City Government of Cebu. In reply, please be informed that based on the foregoing facts, the Japanese Governments particularly the said local government represented by Governor Yukio Aoshima, is exempt from direct tax imposition e.g., donor's tax pursuant to Section 101(A) (2) of the Tax Code of 1997 on its donation in favor of the City Government of Cebu; hence, the said transaction is exempt from the donor's tax. However, as a recipient of tax exempt vehicles, the City Government of Cebu is liable to the 10% value-added tax (VAT) as if it is the importer thereof, pursuant to Section 107(B) of the Tax Code of 1997. The 10% VAT shall be computed on the basis of the depreciated value of the vehicle provided it is not lower than 50% of the invoice value thereof in the country of origin. (BIR Ruling No. 127-94 dated August 22, 1994) This ruling is issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be disclosed that the facts are different, then this ruling shall be declared null and void. cd Very truly yours, (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner (Legal & Enforcement Group)