Taxability of the Sale of a Tax Exempt Car to a Personnel Enjoying Indirect Tax Exemption

September 8, 1992 BIR RULING NO. 254-92 Agreement 083-90 254-92 Asian Development Bank Ortigas Center, Pasig Metro Manila Attention: Mr . Larry S . H . Lim Administrative Officer Travel & Staff Services Gentlemen : This refers to your letter dated July 23, 1992 requesting a ruling whether the sale of a tax exempt car privately owned by a former ADB personnel (no longer enjoying tax exemptions) to another ADB personnel enjoying indirect tax exemption on its local purchase of car under the ADB Headquarters Agreement is subject to VAT and excise tax. Documents submitted show that Mr. Gerhard Kahl, former Sr. Programs Officer, while still an officer of ADB, was authorized under Department of Foreign Affairs Letter No. 6476 dated February 14, 1991, to purchase a Volkswagen Bettle in 1975 without the payment of the corresponding tax; that after resigning from the bank and securing from the office of Protocol, Department of Foreign Affairs, authorization to dispose off said tax exempt car, he executed a deed of sale dated February 28, 1991 in favor of Mr. Christopher J. Wensley, another ADB officer enjoying indirect tax exemption on its local purchase of car. In reply, please be informed that based on the foregoing facts, since the car was acquired by a tax-exempt person and transferred to another tax-exempt person, the fact that the transferor lost his tax-exempt status at the time of transfer, will not subject the transferor or the transferee to VAT or excise tax because it will, in effect, result in the loss of the indirect tax exemption of the transferee under the RP-ADB Headquarters Agreement which entered into force on July 28, 1967. However, as a procedural condition, the transferee, Mr. Christopher J. Wensley should first secure a certification to the effect that he is an authorized officer of the ADB entitled to purchase tax-free vehicle locally. LibLex Very truly yours, JOSE U. ONG Commissioner of Internal Revenue