Tax Exemption of the Donation of a Motor Vehicle by the USAID to an Organization of a Catholic Congregation

August 22, 1994 BIR RULING NO. 127-94 94 (a) (3) 000-00 127-94 Social Action Center Diocese of Naval 6543 Naval, Biliran Leyte Attention: Rev . Fr . Jessie C . Sentina Social Action Director Gentlemen : This refers to your letter dated August 8, 1994 requesting in effect, for exemption from the donor's tax of the donation of a motor vehicle by the United States Agency For International Development (USAID), Manila, Philippines, in favor of the OVC/Social Action Center of Diocese of Naval. It appears that the subject motor vehicle is a used 1987 Chevrolet Suburban, bearing Plate No. OE V-13677, Motor No. VI010D6H, and Serial/Chassis No. 1GNGR 26K8HF110402, and with engine capacity of 5700 CC ; that said vehicle is part of the excess property inventory of USAID; and that, obviously it was brought to the Philippines as a tax-free article under and by virtue of USAID's diplomatic status as adjunct organization of the United States Embassy; that said vehicle is being donated by USAID by way of assistance to your social action project; and that as verbally represented by your representative, you have not formally incorporated as a regular non-stock, non-profit organization. In reply, please be informed that based on the foregoing facts, you are a mandated organization of a Catholic Congregation, more particularly, the Diocese of Naval, Biliran, Leyte and as such, you are very much a part of the latter in which case, you enjoy the same tax-exempt status of a religious organization pursuant to Section 26(e) of the Tax Code. Accordingly, you are exempt from income tax on income received by you as such. Moreover, being an adjunct of the United States Embassy, USAID is exempt from direct tax imposition, e.g., donor's tax. Hence, the USAID is exempt from the donor's tax on its aforesaid donation of a used 1987 Chevrolet Suburban in your favor. Further, since said vehicle has an engine capacity of 5700 CC, it is outside the class of imported utility vehicles which are subject to excise tax based on the criteria prescribed under Department of Finance Circular No. 34-93, implementing Executive Order No. 90. (See BIR Ruling No. 377-93). However, since you are not enjoying indirect tax exemption, as the recipient of a tax exempt vehicle, you are liable to the 10% value-added tax as if you are the importer thereof pursuant to Section 101 (b) of the Tax Code, as amended. The 10% value-added tax shall be computed on the basis of the depreciated value of the vehicle provided it is not lower than 50% of the invoice value thereof in the country of origin. cdtech Very truly yours, LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue