Import and Customs Duties Paid by San Miguel Corporation on Importation of Machinery and Equipment in Connection With Its Business Deductible from Gross Income

October 24, 1997 BIR RULING NO. 113-97 29 (c)-000-00-113-97 San Miguel Corporation 40 San Miguel Avenue Mandaluyong City Attention: Atty . P . Clinton L . Laudencia , Jr . Gentlemen : This refers to your letter dated May 15, 1996 stating that San Miguel Corporation (SMC) is a corporation existing under the laws of the Philippines; that it is engaged in several lines of businesses all over the Philippines; that SMC is the market leader in most of the industries it operates in; that in order to maintain its market leadership and in preparation for the more intense competition from huge multinational corporations due to the General Agreement on Tariff and Trade and the World Trade Organization, the company is embarking in the expansion of its facilities, upgrading and modernizing its plants, among others; that it has been procuring machinery and equipment by way of importation and through local purchases; and that the company paid import and customs duties for the machinery and equipment imported from abroad. llcd Based on the foregoing representations, you are now requesting confirmation of your opinion that payments to the Bureau of Customs of import and customs duties on the imported machinery and equipment are deductible in full pursuant to Section 29(c) of the Tax Code, as amended. In reply, please be informed that pursuant to Section 29(c) of the Tax Code, as amended, taxes paid or incurred within the taxable year in connection with the taxpayer's profession, trade or business except income tax provided under Title II of the Tax Code; income, war profits, and excess profits taxes imposed by authority of any foreign country; estate and donor's taxes; taxes assessed against local benefits of a kind tending to increase the value of the property assessed and electric consumption tax imposed by Batas Pambansa Blg. 36 are deductible in computing taxable income. Moreover, under Section 80 of Revenue Regulations No. 2, import duties paid to the proper customs officers are deductible from gross income. Such being the case, since the import and customs duties paid by SMC on its importation of machinery and equipment are clearly in connection with its business, the same, therefore, are deductible from its gross income under Section 29(c) of the Tax Code, as amended, and Section 80 of Revenue Regulations No. 2. Very truly yours, (SGD.) LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue