Revenue Regulations on Utility Vehicles

May 20, 1993 BIR RULING NO. 229-93 REVENUE REGULATIONS ON UTILITY VEHICLES 149 000-00 229-93 The Commissioner Bureau of Customs Manila This refers to your letter dated March 2, 1993 furnishing us a draft of a Memorandum of Agreement for and between our two offices, stipulating that both the ad valorem and value-added taxes on imported motor vehicles shall be collected by that Office; that the imposable penalty for late payment thereof shall be waived; and that the basic deficiency for the aforesaid taxes shall be discounted for payments made during the 3-month grace period from the implementation of the agreement, so that the importer/owner of the motor vehicles shall be able to claim a discount of 50%, 40% and 30% for the first, second and third months, respectively; and that the identification/classification of motor vehicles, which shall be the basis in the determination of the basic deficiency tax, shall be made jointly with the representatives of the Bureau of Customs and the Bureau of Internal Revenue with due reference to the vehicle classification for registration purposes adopted by the Land Transportation Commission. cdtech In reply, please be informed that this Office has already prepared the draft regulations to govern the taxation of utility vehicles intended not only to supersede all previous ruling and issuances on the subject, but best of all, to simplify their classification. It will be recalled that pursuant to R.A. 4136, this Office approved a Memorandum dated November 14, 1988 of the Chief, Legislative, Ruling and Research Division, defining and conceptualizing automobile to be a 4-wheeled motor vehicle (other than trucks and jeep as defined under R.A. 1188), which is propelled by gasoline, diesel or any motive power fuel and specially designed for the transport of persons and not used primarily for the carrying of freight or merchandise: Provided, however , that its registered carrying capacity shall not exceed nine passengers. Under this definition, certain utility vehicles have the same characteristics of the conventional automobile as to form, size, configuration, comfort and seating capacity have been taxed as automobile. On August 10, 1989, the Automotive Inter-Agency Committee created to undertake the task of classification of the different makes of utility vehicles, recommended the following guidelines, among others: that to be within the class of automobiles for tax purposes, the utility vehicle must have the appearance of an automobile such as touring car, command car, speedstar, sportscar, roadstar, coups, landaulet, close car, limousine, cabriolet, sedan, station wagon; but it shall not look like a jeep, or a truck, etc.; that the utility vehicle is specially designed for passenger use not exceeding 9 including the driver, regardless of whether the seats are original or fabricated, provided that the seat area conforms to the area and specifications prescribed under Article II, Sec. 8(a) of R.A. 4136; that the utility vehicle must not be exceptionally large to accommodate more than nine (9) standard original or fabricated seats; and that the utility vehicle must not be designed for the transport cargo or merchandise. On January 25, 1991, a revised guideline was issued stating that the "seating capacity shall be determined in accordance with the original manufacturer's catalogue, brochures, other publications indicating the vehicle specification, including the seating capacity for the buyer's guidance." Recently, however, this Office detected a flaw in the revised guidelines, dated January 25, 1991. The manufacturer's brochures printed from abroad have been modified to indicate that there are ten or more seats in the utility vehicles; or that the same vehicle, make, brand, or size has less than ten (10) seats but is actually intended for cargo, thus, creating wider area for ambiguity than was previously imagined. In view thereof, and to simplify the process of categorization, the proposed regulations provides that all utility vehicles designed for passenger use shall be taxed as automobiles except: military type jeeps with canvass or hard-top shell similar to the McArthur or Eisenhower jeeps; utility vehicles adopted specifically for the transport of cargo or freight; and utility vehicles known as Asian utility vehicles, such as the Tamaraw, Ford Fiera; similar utility vehicles which are manufactured under the Philippine Light Car Manufacturing Program in accordance with the rules and regulations of the Board of Investments; and a vehicle used as public transport with a registered seating capacity of ten or more passengers. Utility vehicles brought in from other countries as cargo vehicles and taxed as a truck shall be taxable as automobile in the hands of the owner/possessor if the same is converted into a passenger vehicle not exceeding 15 passenger seats. The utility vehicles covered by these regulations shall include, but shall not be limited to, Pajero, Nissan Patrol, Toyota Lite Ace, Mitsubishi L-300, Mazda Van 2200, Mitsubishi Space Wagon, Dodge Caravan, Land Cruiser, Montero, Ford Aerostar, Toyota Hi-Ace, Plymouth Voyager, Isuzu Trooper and similar vehicles. Pending approval of the draft regulations, the foregoing criteria may now be used to categorize all utility vehicles that arrived in the Philippines on or after January 1, 1993. Otherwise, if a vehicle was already released from customs custody, with the corresponding taxes thereon paid in accordance with the previous categorization guidelines, the owner or importer thereof may no longer be subject to further assessment for deficiency or unpaid ad valorem or value-added taxes. This Office is not inclined to adopt the terms contained in the draft Memorandum of Agreement, i.e., waiver of the imposable penalty for late payment, grant of discount, in effect, compromise payment at the rate of 50%, 40% and 30% during the first, second and third months from the implementation of the Agreement, joint BIR-BOC determination in the categorization of an imported motor vehicle for purposes of imposing the ad valorem tax. Instead, this Office would prefer that Office to conduct the task of categorization alone on the basis of the criteria indicated in the proposed regulations, copy of which is herewith enclosed for ready reference. VICTOR A. DEOFERIO, JR. Deputy Commissioner of Internal Revenue