BIR Ruling No. 132-13

April 4, 2013 BIR RULING NO. 132-13 Section 107 (a) of the 1997 Tax Code, as amended Department of Budget and Management Office of the Chief Information Officer 2/F Boncodin Hall, DBM Complex Gen. Solano St.,Malacaang Compound, San Miguel, Manila Gentlemen : This refers to your letter dated October 23, 2012, requesting for the waiver of the Value Added Tax (VAT) imposed on the importation of medicines and supplies donated by the Operation Smile, an International Children's Medical Charity Organization. It is represented that Operation Smile is an International Children's Medical Charity Organization that helps deliver free reconstructive surgery for those born with cleft lip, cleft palate, and similar facial deformities; that it has effectively carried out over 200,000 free operations in sixty countries globally; that a shipment containing donated medicines and supplies to be used by Operation Smile for their Philippine mission has arrived in the country; that Operation Smile has already secured a DSWD duty free permit for the said donation; that Department of Finance still requires Operation Smile to pay VAT on importation of the said donated medicines and supplies; and that you are requesting for the waiver of the Value Added Tax (VAT) which amounts to Eight Million Pesos (P8,000,000) imposed on the said importation. In reply, please be informed that Section 107 (A) of the Tax Code of 1997, as amended, provides: SCaDAE "SEC. 107. Value-added Tax on Importation of Goods . (A) In General. There shall be levied, assessed and collected on every importation of goods a value-added tax equivalent to twelve percent (12%) based on the total value used by the Bureau of Customs in determining tariff and customs duties, plus customs duties, excise taxes, if any, and other charges, such tax to be paid by the importer prior to the release of such goods from customs custody: ..." It is clear from the foregoing provision that generally, all importations are subject to value-added tax. VAT on importation is a tax on the privilege of importing goods whether or not the taxpayer is engaged in business, and regardless of whether the imported goods are intended for sale, barter or exchange, or for personal use. Accordingly, the medicines and supplies donated by Operation Smile even if intended for the use in free reconstructive surgery for those born with cleft lip, cleft palate, and similar facial deformities in the Philippines is subject to Value Added Tax (VAT) at the rate of 12% of the total value used by the Bureau of Customs in determining tariff and customs duties, pursuant to Section 107 (a) of the 1997 Tax Code, as amended. It should be noted that Section 109 (1) of the 1997 Tax Code enumerates the articles which are not subject to Value Added Tax (VAT). Under the maxim expressio unius est exclusio alterius in statutory construction, the mention of one thing implies the exclusion of another. Moreover, exemption from the payment of taxes cannot be created by mere implication. An exemption cannot be claimed unless it is expressly provided for in the law ( Collector vs. Manila Jockey Club ,98 Phil. 670). 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. ETaHCD Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue