Exemption of the USAID Vehicle from the Compensating Tax

July 28, 1988 BIR RULING NO. 356-88 169 (old) 316-87 356-88 Gentlemen : This refers to your letter dated June 14, 1988 stating that you are a non-profit, non-stock educational institution; that on August 5, 1987, you received from the United States Agency for International Development (USAID) a 1972 Ford bus Bluebird for the official operation of your institution; and that the bus is now in the process of registration. You now request that the said vehicle be exempted from tax. In reply, please be informed that pursuant to then Section 169 of the Tax Code which is the provision on compensating tax, "in the case of tax-free articles brought or imported into the Philippines by persons, entities of agencies exempt from tax which are subsequently sold, transferred or exchanged in the Philippines to non-exempt persons or entities, the purchasers or recipients shall be considered the importers thereof and shall be liable for the duty and internal revenue tax due on such importations". Accordingly, as recipient of the vehicle which was originally brought into the Philippines by a tax-exempt agency, your are the party liable for the payment of the compensating tax due thereon. However, pursuant to the 1987 Constitution, as a non-stock, non-profit educational institution, you are exempt from taxes and duties on revenues and assets used actually, directly and exclusively for educational purposes as of February 2, 1987. (BIR Ruling No. 316-87) Accordingly, you are exempt from the compensating tax due on the vehicle in question which you acquired from the USAID. Very truly yours, (SGD.) BIENVENIDO A. TAN, JR. Commissioner