Tax Consequence of Importing Defense Equipment/Systems for Viewing and Display

March 28, 2000 BIR RULING NO. 021-00 105 000-00 021-200 Department of National Defense Camp General Emilio Aguinaldo Quezon City Attention: Hon . Esteban B . Conejos, Jr . Undersecretary and Chairman, DECC Gentlemen : This refers to your letter dated January 20, 2000 relative to the holding in Metro Manila from September 28-30, 2000, as approved by the President of the Republic of the Philippines, of Defense Asia 2000: 9th International Defense Equipment Exhibition and Conference; that in view of the nature of this event and to ensure its success, foreign exhibition will have to bring in their defense equipment/systems and other materials for viewing and display; and that after the exhibition is over, the same defense items/articles will be shipped out of the Philippines, except brochures and other inexpensive product-introduction materials which are normally distributed free-of-charge, in consonance with industry practices. Based on the foregoing, you now in effect request for a ruling on the tax consequence of the bringing in of the foreign exhibitors defense equipment/systems and other materials for viewing and display. In reply, please be informed that Section 105 of the Tax Code of 1997, provides, viz. : "SEC. 105. Persons Liable . Any person who, in the course of trade or business, sells, barters, exchanges, leases goods or properties, renders services, and any person who imports goods shall be subject to the value-added tax (VAT) imposed in Section 106 to 108 of this Code. (Emphasis supplied) xxx xxx xxx Based on the foregoing, importation of goods is subject to 10% VAT based on the total value used by the Bureau of Customs in determining tariff and customs duties, plus customs duties, excise tax, if any, and other charges, such tax to be paid by the importer prior to the release of such goods from customs custody pursuant to Section 107 (A) of the Tax Code of 1997. Since as represented, the imported defense equipment/systems and other materials are for viewing and display only and the same shall be shipped out of the Philippines after the exhibition is over, the said importation is exempt from VAT. Importation connotes permanency and for gain, either for personal use or for business. In the instant case, the importation is in consonance with the exhibition which is for a limited period of time only. However, the exhibitors are required to put up a bond equivalent to the value of the imported defense equipment/systems and other materials which shall answer for VAT and excise tax if any, in the event the participants fail to ship back the aforementioned defense/systems and other materials after the exhibition. This ruling is being 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 considered null and void. Very truly yours, (SGD.) DAKILA B. FONACIER Commissioner of Internal Revenue