Sale of a Wrecked Vehicle Acquired in the Course of Business Will Not be Subject to VAT and Excise Tax

March 20, 1991 BIR RULING NO. 047-91 99,100 224-90 047-91 Gentlemen : This refers to your letter dated January 8, 1991 stating that a motor vehicle (A Mitsubishi Galant with Engine No. 4G63-KE2583 and Chassis No. E33ASn-01224 Silver Beige Metallic Colored) purchased tax-free from a local assembler by Mr. Benny Kwong, an official of Asian Development Bank pursuant to the 2nd Tax Exempt Car Facility under the Car Development Program, was insured with your company for P398,478.55; that said vehicle was involved in an accident as evidence by a police report issued by the National Police Capitol Regional Command, Southern Traffic District, Fort Bonifacio, Metro Manila, resulting in extensive damage that would have required repair cost in the amount of P260,000.00; that since the car was a total loss, you paid the insured the full insurance value of P399,000.00 and in turn acquired ownership of the wrecked vehicle. You now would like to be informed of the kind and amount of taxes you will be required to pay when you sell the wreck. In reply, please be informed that since you have acquired the wrecked vehicle in the course of your insurance business, your contemplated sale thereof is merely incidental to your business; hence, the same will not be subject to value-added tax under Section 100(a) of the Tax Code pursuant to BIR Ruling No. 224-90. You are not also subject to excise tax under Section 149 of the Tax Code because there is no sale to you or importation of the motor vehicle in question. However, if the wrecked vehicle were repaired and sold by you, the proceeds will be subject to income tax. cdtech Very truly yours, (SGD.) JOSE U. ONG Commissioner