BIR Ruling No. 187-14

June 16, 2014 BIR RULING NO. 187-14 RA 6847; Section 150 NIRC Philippine Sports Commission Rizal Memorial Sports Complex Pablo Ocampo Sr., Malate Metro Manila Attention: Atty. Guillermo B. Iroy, Jr. Executive Director Gentlemen : This refers to your letter dated April 11, 2014 requesting exemption from excise tax on the importation by the Philippine Sailing Association (PSA) of sail boats, parts and accessories (collectively referred to hereinafter as the "sports equipment") which have been used by Filipino athletes representing the Philippines in the international competitions. IDTSEH It is represented that the sports equipment was previously imported by the PSC and subsequently used by the PSA, being a recognized National Sports Association, in its international competition representing the Philippines; that the said sports equipment was then exported by PSC to Myanmar on October 31, 2013 on board the vessel "Kota Harta" under Bill of Lading No. MNLRGN130000038 and covered by Export Declaration No. 163598, and used by the Filipino athletes in the recently concluded South East Asian Games ("SEAGAMES") held in Myanmar last December 2013; and that after the SEAGAMES, the sports equipment was shipped back to the Philippines and arrived at the Manila International Container Port (MICP) on January 15, 2014 on board the vessel "Kota Harta" under Bill of Lading No. RGNMNL130000062 and contained in a 1 x 40' dry container. Based on the foregoing representations, it is now being requested that the return shipment of the subject sports equipment into the Philippines be exempt from the payment of excise tax imposed under Section 150 of the 1997 Tax Code, as amended, pursuant to Section 19 of Republic Act No. 6847 otherwise known as, "The Philippine Sports Commission Act," which provides, to wit: "SEC. 19. Tax Exemptions of the Commission . The Commission shall be exempted from the payment of customs duties, taxes and tariffs on the importation of sportswear, equipment, supplies, instruments and materials, including those donated to the Commission, which are of international sports standard not available from local manufacturers and only in such numbers as may be required in the development of various sports and/or training of the national pool of athletes . The importation of sportswear, equipment, supplies, instruments and materials donated to the Philippine Olympic Committee and, through the Commission, to the various national sports associations certified under oath by the Commission to be required and necessary for the development of sports in the country shall also be exempt from the payment of customs duties, taxes and tariffs." In reply, please be informed that the above-quoted provision is clear that the PSC shall be exempt from the payment of customs taxes, duties and tariffs when it imports sportswear, equipment, supplies, instruments and materials. Such provision, however, is not absolute, as there are certain conditions that have to be met before an importation by the PSC can be exempt from the applicable taxes and duties. First, the sportswear, equipment, supplies, instruments and materials are required in the development of various sports and/or training of the national pool of athletes; second, they must be of international sports standard; and third, they are not available from local manufacturers. In order to implement the above provision, the PSC issued the Implementing Rules and Regulations setting forth the requirements to avail of the tax exemption provided in RA 6847. Rule VI, Section 2 thereof provides, to wit: ASIDTa "Section 2. Conditions . In order to avail of the exemptions provided by the Act, the following guidelines and conditions are hereby prescribed: b) Tax Exemption from the payment of customs duties, taxes and tariffs . Section 3, of the Department of Finance Joint Order No. 1-90, is hereby adopted as the basis on how to avail the exemptions from the payment of customs duties, taxes and tariffs, as follows: b.1) Direct Importation. Letter Application signed by the Chairman of the Commission or his duly authorized representatives, attaching therewith the usual import documents, such as: b.1.1) Bill of Lading, Airway Bill Parcel Post Notice or other shipping documents; b.1.2) Commercial Invoice and packing list; and b.1.3) Other relevant documents covering the shipment; b.1.4) Certification from the Commission that the imported articles are of international sports standards as defined in Section 2, and the same are required in the development of various sports and/or training of the national pool of athletes, provided that said articles shall not be subject for sale, hire, lease, barter nor transfer for any consideration; and b.1.5) Certification from the Department of Trade and Industry (DTI) that the imported articles are not locally available." EDCcaS A careful perusal of the provision of Section 19 of RA 6847 shows that the tax exemption on the importation of sports equipment can only be availed of by the PSC. In the instant case, the importer of the sports equipment is the Philippine Sailing Association and not the PSC itself, as evidenced by the Certification dated February 3, 2014 issued by the PSC. While the Philippine Sailing Association is a recognized National Sports Association by the PSC, it has a juridical personality separate and distinct from that of the PSC. Consequently, any tax exemption granted to PSC cannot be extended to the Philippine Sailing Association pursuant to the principle that tax exemptions are construed in strictissimi juris against the taxpayer and liberally in favor of the taxing authority. It cannot be deduced by mere implication. And he who claims an exemption from his share of the common burden of taxation must justify his claim by showing that the Legislature intended to exempt him by words too plain to be beyond doubt or mistake ( City of Iloilo, et al. vs. Smart Communications, Inc. , G.R. No. 167260 , dated February 27, 2009). Furthermore, the requirement of a Certification from the Department of Trade and Industry that the imported articles are not locally available suggests that the tax exemption covers only the original importation of sports equipment for the purpose of acquiring them when they are not locally available. Thus, a return shipment is no longer covered by the exemption under Section 19 of RA 6847. Accordingly, the request of PSC for exemption from the payment of excise tax imposed under Section 150 of the 1997 Tax Code, as amended, on the importation of the subject sports equipment cannot be granted for lack of legal basis. Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue