Department of National Defense

March 1, 2017 BIR RULING NO. 095-17 RA 7898, as amended by RA 10349; BIR Ruling No. 396-2014; BIR Ruling No. 397-2014; BIR Ruling No. 398-2014 Department of National Defense DND Building, Camp Gen. Emilio Aguinaldo Quezon City Attention: Honorio S. Azcueta Officer-in-Charge Gentlemen : This refers to your letter dated October 22, 2014, requesting for the issuance of certificate of exemption from value-added tax and documentary stamp tax on the importation of 44 units of 60mm Mortar for the Philippine Army, as specified in the Letter of Acceptance PI-B-UAH, an agreement that was entered into by and between the DND/AFP and United States of America/JUSMAG. The project has an estimated cost of USD_______________. It is represented that the acquisition of the above equipment is exempt from value-added tax and customs duties pursuant to Section 10 of Republic Act (RA) No. 10349, amending RA No. 7898, as well as from DST pursuant to the decision of the Supreme Court in the case of Fort Bonifacio Development Corporation vs. Commissioner of Internal Revenue ,G.R. Nos. 164155 and 175543, February 25, 2013. In reply, please be informed that Section 10 of RA 10349, amending RA No. 7898, provides: " SEC. 10. Insert three (3) sections after Section 16 of the same Act which shall now become the new Sections 17, 18 and 19 respectively, which shall read as : 'SEC. 17. Exemption from Value-Added Tax and Customs Duties. The sale of weapons, equipment and ammunitions to the AFP, which are directly and exclusively used for its projects, undertakings, activities and programs under the Revised AFP Modernization Act, shall be exempt from the value-added tax; Provided, That the importation of the same by the AFP shall likewise be exempt from the value-added tax and customs duties.' xxx xxx xxx" Under Section 10 of RA 10349, the sale of weapons, equipment and ammunitions to the Armed Forces of the Philippines (AFP), which are directly and exclusively used for its projects, undertakings, activities and programs under the Revised AFP Modernization Act, shall be exempt from the value-added tax. Moreover, the importation of the same by the AFP shall likewise be exempt from the value-added tax. (BIR Ruling Nos. 396-2014, 397-2014 and 398-2014 dated October 17, 2014) Accordingly, the purchase and subsequent importation by DND/AFP of 44 units of 60mm Mortar are exempt from value-added tax, provided that the aforesaid equipment shall be used directly and exclusively by the AFP for its projects, undertakings, activities and programs under the Revised AFP Modernization Act. Anent the issue on DST, please take note that the sale of personal property is not subject to DST. Under Section 196 of the 1997 Tax Code, only the conveyances, deeds or instruments transferring any land, tenement or other real property shall be subject to DST. The cited case of Fort Bonifacio Development Corporation vs. Commissioner of Internal Revenue, supra , is inapplicable since the issue therein was the imposition of DST on the sale of a parcel of land, which is not the issue in this case. However, the notarial acknowledgment on the deed of sale is subject to the documentary stamp tax of P15.00 pursuant to Section 188 of the 1997 Tax Code. (BIR Ruling Nos. 396-2014, 397-2014 and 398-2014 dated October 17, 2014) 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.) CAESAR R. DULAY Commissioner of Internal Revenue