Value in Pesos of Foreign Exchange Payments for Merchandise Imports Not Subject to 10% Special Excise Tax

August 8, 1985 BIR RULING NO. 119-85 260-A 032-85 119-85 Gentlemen : This refers to your letter dated March 15, 1985 requesting for a clarificatory ruling on whether foreign exchange payments for importation-related freight and demurrage charges are included in exception from the 10% special excise tax under P.D. No. 1928 on "payments of merchandise imports to the Philippines." cdt In reply, please be informed that under Section 1 of P.D. No. 1928, pertinent portion of which is quoted hereunder as follows: "Sec. 1. There shall be levied, assessed, collected and paid a special excise tax of ten per centum (10%) on the value in pesos of foreign exchange sold by the Central Bank of the Philippines or any of its agents, except for payments of merchandise imports to the Philippines ." (emphasis supplied) the value in pesos of foreign exchange payments for merchandise imports to the Philippines, including freight and demurrage charges, which are necessary and related costs of importation, is not subject to the 10% special excise tax prescribed therein. In this connection, it may be stated that P.D. No. 1928 has been repealed by P.D. No. 1953. However, the sale of foreign exchange to cover payment of imports to the Philippines is subject to 1% transaction tax. (Sec. 260-A, Tax Code, as inserted by P.D. No. 1959) Very truly yours, (SGD.) RUBEN B. ANCHETA Acting Commissioner