Request for Exemption from Payment of Compensating and/or Advance Sales Tax on Importation of Tobacco

December 8, 1986 BIR RULING NO. 267-86 169 (a) 000-00 267-86 Gentlemen : This refers to your letter dated November 18, 1986 requesting exemption from the payment of compensating and/or advance sales tax on your importation of 64 kilos of various grades of Greek Oriental and Burley Leaf tobacco under Lufthansa Airway Bill No. 220-5085-4381. cdt It is represented that the Philippine Virginia Tobacco Administration (PVTA) has been encouraging and strengthening its production of Philippine tobacco for export and local supply, quality and quantity wise, for the benefit of the country's economy; that your aforesaid importation was upon the initiative of PVTA after considering that corporation as one of the traditional exporters of Philippine tobacco and knowing it to have contacts with foreign buyers which could supply the sample tobaccos; and that the said imported 64 kilos of various grades of Greek Oriental and Burley leaf tobacco will not be utilized in the manufacture of any brand of cigarettes but instead it will be analyzed and used for comparison/measurement purposes with local tobacco production, as to quality and composition, before actual exportation is made. In reply, please be informed that Section 169(a) of the Tax Code, as amended, read as follows: "Sec. 169. Compensating Tax . xxx xxx xxx (c) Taxable articles There shall be imposed upon the importer of commodities goods, wares, or merchandise brought into the Philippines, a compensating tax equivalent to the rates prescribed in Section 163 based on the total value used by the Bureau of Customs in determining tariff and customs duties, including customs duty and all other charges , such tax to be paid before the withdrawal of the said commodities, goods, wares or merchandise from the customshouse or the post office." On the other hand, agricultural non-food product in its original state is subject to tax at the 0% rate, pursuant to Section 163(3) of the Tax Code, as amended by Executive Order No. 36. Accordingly, the imported leaf tobacco in question being an agricultural non-food product in its original state, is subject to compensating tax at the 0% rate. In other words, said importation is not subject to compensating tax. (BIR Ruling No. 207-86). cdti Very truly yours, (SGD.) BIENVENIDO A. TAN, JR. Commissioner of Internal Revenue By: EUFRACIO D. SANTOS Assistant Commissioner