Tax Consequence of a Donation

August 17, 1989 BIR RULING NO. 176-89 94 (a) (3) 000-00 176-89 Gentlemen : This refers to your letter dated August 29, 1988 stating that a 1987 Toyota Corona 1800, 4-door Sedan GL, Model ST 150L TEHNS, Frame #ST 150-0211639, Engine No. IS-1009350, with a purchase price of DM 22,786.50 was imported by the Summer Institute of Linguistics (SIL) for the use of the Resources for the Blind, Inc. (RBI), which is a department of SIL; that SIL has donated said vehicle to the RBI; that the Summer Institute of Linguistics is a non-stock, non-profit, charitable institution which allegedly enjoys tax exemption privilege on its importation of cars, other equipment and supplies needed to carry out its work pursuant to an agreement with the Department of Education, Culture and Sports (DECS) as indicated in the Department of Finance Ruling dated October 31, 1958; and that the Resources for the Blind, Inc., on the other hand, has not been granted similar tax exemption privilege. It is verbally represented that same vehicle was released to SIL from customs custody without the payment of any tax. Based on the foregoing facts, you now request for a ruling on the tax consequence of said donation. In reply, please be informed that since RBI, the donee institution, appears to be a social welfare organization, the aforesaid donation by SIL is exempt from the donor's tax pursuant to Section 94(a)(3) of the Tax Code. However, it appears in the above Ruling of the Department of Finance that the exemption from compensating tax only covers "technical equipment and apparatus". Obviously, the exemption does not include vehicles . Accordingly, since the above importation took place in 1987 (before the VAT Law), said importation is subject to the compensating tax imposed by then Section 169 of the Tax Code. Said compensating tax is payable by SIL, the importer thereof and the same constitutes a lien on the vehicle itself, superior to all other charges or liens, irrespective of the possessor thereof. aisadc Very truly yours, (SGD.) JOSE U. ONG Commissioner