Motor Vehicle Purchased from US Embassy Employee Subject to Ad Valorem Tax

October 7, 1999 BIR RULING NO. 157-99 149; 128; 126-00-000-157-99 Mr. Ashok Ramnani No. 7 Oliva Street Pasig City Attention: Mr . Fidel G . Conrada Head, Mabuhay Lane Gentlemen : This refers to your letter dated April 13, 1999 and indorsed to this Office on April 21, 1999 by the Department of Finance, requesting that your motor vehicle which you purchased on June 26, 1996 from David K. Greenberg of the U.S. Embassy, Manila, be subject to compensating tax and not ad valorem tax as provided under the National Internal Revenue Code. It is represented that you are residing at Oliva Street, Pasig City, Rizal; that on June 26, 1996, you purchased a 1984 Nissan 300ZX, charcoal gray, 6 cylinder with serial number JN1HZ16S6EX019466 from David K. Greenberg, a citizen of the United States of America and an employee of the U.S. Embassy; that as a member of foreign diplomatic corps, the said vehicle was brought into the Philippines free from all duties and taxes; and that you intend to change the engine to less than 6 cylinder inasmuch as a 6 cylinder engine would entail costly fuel consumption. In reply, please be informed that since the transfer was executed on June 26, 1996, Section 149 in relation to Section 128, both of the Tax Code, as amended shall apply in the determination of the excise tax due to be imposed thereon. Section 149 of the Tax Code, as amended provides as follows: SEC. 149. Automobiles . There shall be levied, assessed and collected an ad valorem tax on automobiles based on the manufacturer ' s or importer's selling price net of excise and value-added tax , in accordance with the following schedule: Engine displacement (in cc) Gasoline Diesel Tax Rate up to 1600 up to 1800 15% 1601 to 2000 1801 to 2300 35% 2001 to 2700 2301 to 3000 50% 2701 to over 3001 to over 100% Provided, That in the case of imported automobiles not for sale, the tax imposed herein shall be based on the total value used by the Bureau of Customs in determining tariff and customs duties, including customs duty and all other charges, plus (10%) of the total thereof. ( As amended by E . O . No . 273 ) Relative to the above provision of the law, Section 128 of the same Code states SEC. 128. Payment of excise taxes on imported articles . (a) Persons liable . Excise taxes on imported articles shall be paid by the owner or imported to the customs officers, conformably with the regulations of the Department of Finance and before the release of such articles from the customhouse, or by the person who is found in possession of articles which are exempt from excise taxes other than those legally entitled to exemption. In case of tax-free articles brought or imported into the Philippines by persons , entities , or agencies exempted from tax which are subsequently sold , transferred or exchanged in the Philippines to non-exempt persons or entities , the purchasers or recipients shall be considered the importers thereof , and shall be liable for the duty and internal revenue tax due on such importation . The tax due on such article shall constitute a lien on the article itself, superior to all other charges or liens, irrespective of the possessor thereof. cdll (b) Rate and basis of the excise tax on imported articles . Unless otherwise specified, imported articles shall be subject to the same rates and basis of excise taxes applicable to locally manufactured articles. Such being the case, you are subject to ad valorem tax on automobiles based on the manufacturer's or importer's selling price, net of excise and value-added taxes pursuant to Section 149 of the Tax Code, as amended by Executive Order No. 273 and not to compensating tax. (BIR Ruling No. 75-89 dated April 14, 1989) Said ad valorem tax is in addition to the 10% value-added tax in accordance with Section 126 of the same Code which provides: SEC. 126. Goods subject to excise taxes . Excise taxes apply to goods manufactured or produced in the Philippines for domestic sale or consumption or for any other disposition and to things imported. The excise tax imposed herein shall be in addition to the value-added tax imposed under Title IV . For purposes of this Title, excise taxes herein imposed and based on weight or volume capacity or any other physical unit of measurement shall be referred to as "specific tax" and an excise tax herein imposed and based on selling price or other specified value of the goods shall be referred to as "ad valorem tax". 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. LibLex Please be guided accordingly. Very truly yours, (SGD.) BEETHOVEN L. RUALO Commissioner of Internal Revenue