Importation of a Motor Vehicle if Categorized as Automobile is Subject to VAT and Ad-Valorem Tax

February 20, 1996 BIR RULING NO. 017-96 101 (a) 149 000-00 017-96 President Jose P. Laurel Rural Bank, Inc. Tanauan, Batangas Attention: Mr . Antonio M . Lantin Corporate Secretary Gentlemen : This refers to your letter dated October 12, 1995 requesting for a ruling as to whether you can import a motor vehicle for your official use free of tax. In reply thereto, please be informed that Section 15 of Republic Act No. 7353 otherwise known as the Rural Banks Act of 1992 provides that all rural banks created under its provisions and those already in operation as of the date of approval thereof shall be exempt from the payment of all taxes, fees and charges of whatever nature and description, except the corporate income tax. VAT on importations under Section 101 (a) of the Tax Code, as amended is not a tax on the operation of the rural bank. It is a tax on the privilege of importing goods whether or not the taxpayer is engaged in business, and regardless of whether the imported goods are intended for sale, barter or exchange, or for personal use. In other words, VAT under Section 101 (a) of the Tax Code, as amended, replaced the advance sales tax and compensating tax under then Sections 183 (b) and 199 respectively, of the old Tax Code. Accordingly, your exemption from taxes under Republic Act No. 7353 does not include VAT on importation under Section 101 (a) of the Tax Code, as amended. In view thereof, your importation of a motor vehicle if categorized as automobile is subject to VAT and ad-valorem tax pursuant to Sections 101 (a) and 149 both of the Tax Code, as amended. Very truly yours, LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue