Donation of Two (2) Motor Vehicles by the United States Agency for International Development, Manila (USAID-Manila) in Favor of the Provincial Government of Bulacan Not Exempt from Tax

February 9, 1995 BIR RULING NO. 016-95 92 (b) 94 (a) (2) 000-00 016-95 Hon. Roberto M. Pagdanganan Governor, Province of Bulacan Malolos, Bulacan Gentlemen : This refers to your letter dated August 8, 1994, in effect, requesting for a ruling that the donation of two (2) motor vehicles by the United States Agency for International Development, Manila (USAID-Manila) in favor of the Provincial Government of Bulacan is exempt from tax. The subject motor vehicles which are specially described as follows: One (1) unit Trust Pick-up with Chassis No. : JAABL14S6E0727191 Model : Isuzu Color : White a n d One (1) unit Truck Pickup, with Chassis No. : D14JNASA33083 Model : Dodge Color : Black are part of the excess property inventory of USAID and that, obviously, they were brought to the Philippines as tax-free articles under and by virtue of USAID'S diplomatic status as an adjunct organization of the United States Embassy; and that said vehicles are being donated, by way of assistance, to the Provincial Government of Bulacan. In reply, please be informed that gifts made to or for the use of the National Government or any entity created by any of the agencies which is not conducted for profit, or to any political subdivision of the said Government shall be exempt from the other's tax pursuant to Section 94(a)(2) of the Tax Code, as amended. Such being the case, the aforementioned donation of two (2) motor vehicle in favor of the Provincial Government of Bulacan, a political subdivision of the National Government, is United States Embassy, USAID is exempt from direct tax imposition, i. e. donor's tax. Since, as represented, the said vehicles have engine capacities of 1,900 cc for Isuzu and 2,500 cc for Dodge, they are within the class of imported utility vehicles which are subject to excise tax based on the criteria prescribed under Department of Finance Circular No, 34-93, implementing Executive Order No. 90 (See BIR Ruling No. 377-93. However, if the same bear Year Model 1988 and prior date and were brought into the Philippines prior the April 14, 1989, they shall be exempt from ad valorem tax following the criteria prescribed under BIR Ruling No. 75-89 issued April 14, 1989. Moreover, since the donee in this case is not enjoying indirect tax exemption, as the recipient of tax exempt vehicles, the Provincial Government of Bulacan is liable to the value-added tax as if it is the importer thereof pursuant to Section 102(b) of the Tax Code, as amended. The 10% value-added tax liability shall be computed on the basis of the depreciated value of the vehicle; provided, it is not lower than 50% of the invoice value in the country of origin. However, if said vehicle was brought to the Philippines prior to the effectivity of the value-added tax law (E.O. No. 273) on January 1, 1988, you are subject to the compensating tax pursuant to then Section 169 of the Tax Code (prior to its amendment by Executive Order No. 273 effective January 1, 1998). Very truly yours, LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue