Imported Spare Parts of Industrial Machines by a BOI-registered Export Producer are Exempt from Compensating Tax

December 18, 1987 BIR RULING NO. 405-87 169 000-00 405-87 Gentlemen : This refers to your letter dated October 22, 1987 stating that you are registered with the Board of Investments as export producer pursuant to P.D. No. 1789, as amended by B.P. Blg. 391 (Certificate of Registration No. 87-1332), that you are engaged in the manufacture and preparation of chemical ingredients like calcium chloride flakes, caustic soda, hydrochloric acid and sodium hydrochloride which are used in the manufacture and preparation of essential articles e.g. food, medicines, beer, beverages and toothpaste; and that you have a pending importation of spare parts for your industrial chemical machines consisting of electrode board, rod, impeller, for HCI, exhauster, hammer mill rotary disc, etc. covered by Bills of Lading No. 674782 and 674781. It is also alleged that you have obtained a certificate of authority from the Board of Investments for the importation of the aforesaid spare parts and that you have submitted said certificate to your Bank to support your application for a letter of credit covering this particular importation. In reply, please be informed that spare parts of industrial machines are considered capital equipment; hence, by virtue of your registration with BOI, you are exempt from compensating tax due on your importation thereof pursuant to Article 48 of P.D. No. 1789, as amended by B.P. Blg. 391 stating: "Art. 48. Incentives for Registered New or Expanding Export Producer . All registered export producers, whether pioneer or non-pioneer, shall be granted the following incentives to the extent engaged in new capacity or expansion of capacity in a preferred area of investment: "(a) Tax and Duty Exemption on Imported Capital Equipment . Full tax and duty exemption of imported capital equipment under the same conditions set forth in subparagraph (a) Article 45. . ." Very truly yours, (SGD.) BIENVENIDO A. TAN, JR. Commissioner