Utility Vehicle Imported Prior to Issuance of BIR Ruling 075-89 - Exempt from Ad Valorem Tax

December 27, 1993 BIR RULING NO. 528-93 UTILITY VEHICLE IMPORTED PRIOR TO ISSUANCE OF BIR RULING 075-89 EXEMPT FROM AD VALOREM TAX 149 000-00 528-93 King, Capuchino, Tan & Associates 2nd Floor, Belman II Building Quezon Avenue cor. Cordillera Street Quezon City, Metro Manila Attention: Lincoln L . Tan, Jr . This refers to your letter dated September 10, 1993 requesting in behalf of your client, Mr. Roger S. Baldo, a ruling to the effect that his imported 1988 Dodge Ram Van 3900 cc/2409 kgs., is exempt from ad valorem tax. LLpr It appears that said imported utility vehicle was released from Customs custody on February 22, 1989 without payment of the ad valorem tax; that it was already registered and re-registered with the Land Transportation Office (LTO) since February 22, 1989 under Plate No. UV-PKY-848; that for this year, when it was presented for re-registration, the LTO required your client to present a clearance from the Bureau of Customs to evidence satisfactory settlement of its ad valorem tax liability at the compromise rate provided under Finance Department Order No. 34-93 dated June 10, 1993, implementing Executive Order No. 90 issued May 19, 1993 which prescribed for the retroactive imposition of ad valorem tax at the compromise rates on all imported utility vehicles with year models 1988 to 1992 with engine displacements from 2000 cc to 45 cc. that have escaped payment of the ad valorem tax when released from Customs custody. In reply, please be informed that prior to the issuance of BIR Ruling No. 075-89 on April 14, 1989 which officially enforced the definition of automobile previously adopted in the Memorandum of the Chief, Legislative, Ruling and Research Division dated November 14, 1988, duly approved by the Commissioner, embracing certain utility vehicles within the category of automobiles, all utility vehicles were then taxed as trucks; hence, exempt from ad valorem tax. Said ruling however, which depended solely on seating capacity as the criterion in categorization was found to be very subjective causing many imported utility vehicles having the same characteristics of automobile to escape payment of ad valorem tax. In order to make the categorization simpler and more objective, Executive Order No. 90 was issued prescribing engine displacement between 2000 cc and 4500 cc as the criterion in categorization for purposes of subjecting the imported utility vehicles to the ad valorem tax at the compromise rate if the year model is between 1988 to 1992 and obviously at the full rate if the year model is 1993 and subsequent years. Since the above-described vehicle was brought to the country and released from Customs custody prior to April 14, 1989, it was not yet covered by BIR Ruling No. 075-89 and, consequently, by Executive Order No. 90. Moreover, in the case of importation, the Import Entry declaration accomplished by the taxpayer disclosing the computation of the importer's tax liability which must be paid prior to its release from customs custody constitute as the return for internal revenue tax purposes. Accordingly, the three-year prescriptive period for the issuance of deficiency assessment reckoned from the filing of said return (Import Entry Declaration) has already lapsed. In view thereof, this office is of the opinion and so holds that your client, Mr. Roger S. Baldo, may no longer be liable for unpaid ad valorem tax on his 1988 Dodge Ram Van 3900 which was released from customs custody on February 22, 1989, prior to the issuance of BIR Ruling No. 075-89 and after the lapse of the three-year prescriptive period of assessment pursuant to Section 203 of the Tax Code. aisadc LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue