Exemption from Advance Sales Tax — Financing Charges

January 8, 1981 BIR RULING NO. 004-81 193-b 000-78 004-81 Filipinas Synthetic Fiber Corporation P.O. Box 1037 Makati Commercial Center Makati, Metro Manila Attention: Mr . Manuel B . Caragay Vice-President Gentlemen : This refers to your letter dated March 7, 1980 requesting information as to whether financing charges of a supplier in consideration of deferred payment of goods supplied is a part of the landed cost in computing the advance sales tax due on the imported articles. It is represented that many of your importation of raw materials needed in the manufacture of polyester yarns and fibers are under "Draft Acceptance 130 days After Bill of Lading Date", mode of payment; that because of this deferred payment, you pay to the supplier financing charges which are separately indicated in the cost of the commodity as stated in the invoice covering such shipments. In reply, please be informed that under Section 193(b) of the Tax Code, as amended, the advance sales tax on imported articles is based on the landed cost thereof plus the corresponding mark-up. The landed cost of an imported article is the home consumption value or price (excluding internal excise taxes) thereof, plus 10% of such home consumption value or price, including postage, commission, customs duty and all similar charges, except freight and insurance. The phrase "all similar charges" found in the law refers to specific charges which an importer has to pay to complete his importation. In other words, said phrase includes all charges or expenses necessarily incurred by the importer to secure the release of imported goods from customs custody. From the foregoing, it is clear that the financing charges charged by your suppliers in consideration of deferred payment of goods supplied is not an expense to complete the importation thereof and, therefore, said charges do not form part of the landed cost in computing the advance sales tax. Very truly yours, RUBEN B. ANCHETA Acting Commissioner