Issuance of Tax Compliance Certificate to NIA Equivalent to Payment of Compensating Tax Due on Said Importation

August 22, 1985 BIR RULING NO. 133-85 204 000-00 133-85 Gentlemen : This refers to your letter dated May 17, 1984 requesting a ruling that the equipment procured and used by you as the agent of the National Irrigation Administration be considered tax-paid and disposed of as such in view of the Payment Compliance Certificate issued to the latter covering the amount of the compensating tax due on said importation. cdt It is represented that the Contract Agreement between the National Irrigation Administration (NIA) and the Hydro Resources Contractors Corporation (Hydro) as embodied in their Contract No. UPI-C-1, Contract No. API-C-1, and Contract No. UPI-C-5, relative to the construction of the Pantabangan Dam and Appurtenant Structures, Upper Pampanga River Project, Aurora Transbasin Diversion-Upper Pampanga River Project and Pantabangan-Masiway Re-Regulation Dam, respectively provides, among others: 1. Procurement The Contractor shall undertake to procure, as an Agent of NIA, the required equipment. 2. Financing NIA, through the World Bank, shall make available to Hydro foreign exchange to specified maximum amounts or the purpose of importing equipment and parts necessary to execute the contracts. The goods shall be consigned to NIA who shall retain ownership into full repayment. 3. Repayment Upon full payment, ownership of the equipment and parts shall be transferred to Hydro. 4. Tax and Duties At the time the contractor has fully paid . . . and the ownership of said equipment is transferred to the contractor, the NIA will assume payment of all taxes and duties that may be due the Philippine Government out of the ownership transfer of these equipment. Documentary evidence submitted show that Hydro, as the agent of NIA, imported various equipment which are particularly described in the subsequent Deeds of Absolute Sale executed by the parties on different dates evidencing completion of payment by Hydro to NIA, and ceding the equipment to Hydro, viz: cdt Description of Date of Contract No. Date Equipment Absolute Sale Value UPI-C-1 2-22-71 CAT loaders, 12-27-74 P2,478,051.04 mixers, dump trucks, etc. UPI-C-1 2-22-71 CAT trucks, crawlers 4-22-75 17,917,300.94 UPI-C-1 2-22-71 Copco air compressor, 8-21-75 18,869,410.72 rock drill rods, tires, etc. API-C-1 9-20-74 1 unit Helicopter 8-21-75 1,282,500.00 API-C-1 9-0-74 Toyota land cruiser, 11-25-75 552,328.52 etc. API-C-1 9-20-74 Self-propelled plate 4-05-77 14,691,615.17 compactors, etc. UPI-C-5 3-74 Peterbilt dump 6-23-76 4,881,710.62 trucks, etc. UPI-C-5 3-74 CAT wheel loader, etc. 7-09-76 6,282,307.33 In reply, I have the honor to inform you that NIA is authorized to incur foreign loans and to use these loans to import equipment, among others; and that said importation shall be exempted from all direct and indirect taxes . (Sec. 3, P.D. No. 552) However, under the provision of Section 23, P.D. No. 1177, as implemented by Budget Circular No. 289 and Finance Circular No. 2-78, all units of government, including government-owned or controlled corporations, are subject to all forms of taxes; thus NIA in effect, lost its tax exemption benefit and became liable for the compensating tax due on its importation of equipment. Nevertheless, instead of paying cash, secured a Tax Compliance Certificate from the Bureau of Internal Revenue as provided in the aforesaid Budget and Finance Circulars. In view thereof, this Office is of the opinion and so holds, that the issuance of the Tax Compliance Certificate in favor of NIA, covering its importation of the aforesaid equipment before June 11, 1984 when P.D. No. 1931 took effect is equivalent to payment of the compensating tax due on said importation. Accordingly, the same may thereafter be disposed of by Hydro as tax-paid equipment. cdtech Very truly yours, (SGD.) RUBEN B. ANCHETA Acting Commissioner