Denial of Request for Exemption from Payment of Tax for Vehicles to be Sold to Non-Tax Exempt Person

April 24, 2002 BIR RULING NO. 016-02 131 (A) 000-00 Hon. Noel Eli B. Kintanar Undersecretary/Executive Director Coordinating Council For Private Sector Participation Malacaang Palace S i r : This refers to your letter dated October 22, 2001, requesting exemption from the payment of ad valorem tax for the six (6) units of Cherokee Jeeps which you intend to sell to non-tax exempt individual/entity. In support of your request, you stated that the said vehicles, which were donated in 1990 and 1991 by the United States Agency for International development (USAID) to the Coordinating Council For Private Sector Participation (CCPSP) pursuant to the provision of the Philippine Assistance Program Support Project, are now beyond the useful life of ten (10) years, as indicated in US Treasury Bulletin F; that on September 21, 2000, the Commission on Audit (COA) conducted a Value for Money Audit and found out that the said vehicles are beyond economical repair; that since a year had already elapsed since the audit was conducted, the vehicles deteriorated further and most, if not all, are now junks; that the Department of Finance gave you a written notice to vacate the parking slots where the vehicles are parked but your Office has to parking area where those vehicles could be transferred; that due to those compelling reasons, the CCPSP Management decided to sell said unserviceable vehicles in a public auction; that at its present condition, the vehicles may not carry a price enough to pay the taxes due thereon; and that CCPSP is planning to utilize the proceeds of the sale to purchase a brand new vehicle as the replacement of the six (6) units to be sold. In reply, please be informed that the power to grant tax exemptions, like the power to tax, is exclusively lodged in Congress. This Office only enforces the tax laws and grants the exemptions provided for in said laws. We regret to inform you that there is no provision in the Tax Code of 1997 and revenue regulations promulgated by this Office granting exemption from taxes the subsequent sale or transfer of vehicles by the tax-exempt person/entity to a non tax-exempt person or entity. At any rate, it is not your Office which shall be liable for the duty and internal revenue tax due on the sale of the said six (6) units Cherokee Jeeps but the purchaser/s thereof, pursuant to the second paragraph of Section 131 (A) of the Tax Code of 1997, reading: "Sec. 131. Payment of Excise Taxes on Imported Articles. "(A) Persons Liable. . . . xxx xxx xxx "In the case of tax-free articles brought or imported into the Philippines by persons, entities, or agencies exempt from tax which are subsequently sold, transferred or exchanged in the Philippines to non-exempt persons or entities, the purchasers or recipients shall be considered the importers thereof, and shall be liable for the duty and internal revenue tax due on such importation. xxx xxx xxx We regret, therefore, to deny your aforesaid request for lack of legal basis. Very truly yours, (SGD.) REN G. BAEZ Commissioner of Internal Revenue