10% VAT on the Siemens Solar Panels

December 19, 1988 BIR RULING NO. 590-88 101 (a) 000-00 590-88 Gentlemen : This refers to your letter dated October 27, 1988 which was referred to this Office by the Secretary of Finance relative to your request for exemption from the payment of customs duties, fees and taxes as stipulated in our country agreement with the German government and also from the 10% and ad valorem tax imposed under Section 5(2) of Executive Order No. 955 (not Executive Order No. 995) on the importation of Siemens solar panels where the consignee is Base Corporation of 700 Lerma St., Mandaluyong, Metro Manila. cdtech It is represented that the Philippine-German Solar Energy Project (PGSEP) which is implemented by the Office of the Energy Affairs thru the German Agency for Technical Cooperation (GTZ) and the PNOC-Energy Research and Development Center is covered by a joint technical Cooperation Agreement signed by the governments of the Philippines and the Federal Republic of Germany and is aimed primarily at looking into the possibility of utilizing solar energy in our countryside thru the installation of solar photovoltaic (PC) power supply systems which could help meet the basic electrical needs of the rural communities; that in its seven (7) years of implementation, PGSEP was able to install demonstration projects and systems in different parts of the country to generate valuable data to determine the viability of the technology which include stand alone power supplies for rural households, battery charging stations, drinking power pumps, refrigeration, circulation, navigational aids and telecommunications. You also stated that you have selected for your demonstration projects the municipality of San Pascual in Burias Island, Masbate, where a PV-powered refrigeration, battery-charging station, video-cine power supply, electronic repair shop and telecommunication facility where installed; that you plan to install 100 units solar home systems which will represent the first batch of PV power supplies ever to be commercialized in the Philippines and in Asia; that in this undertaking, the involvement of Base Corporation would be required in the importation of solar panels, inasmuch as your project staff has trained the former's staff in the installation of the solar home systems. In reply, I regret to inform you that your request cannot be granted for lack of legal basis. It is noted that the Arrangement between the Governments of the Republic of the Philippines and the Federal Republic of Germany grants exemption from tax only if the materials are supplied by the Government of the Federal Republic of Germany. [See Par. 3(e), Note dated March 16, 1987] The exemption therefor will not extend to materials purchased from abroad and imported by Base Corporation. Pursuant to Section 101(a) of the Tax Code as amended by E.O. No. 273, the said importation of Siemens solar panels is subject to value-added tax of 10% based on the total value used by the Bureau of Customs in determining tariff and customs duties, plus customs duties, excise tax, if any, and other charges, such tax to be paid prior to the release of said goods from customs custody. It may be stated in this connection that E.O. No. 955 which provides for the imposition of an additional duty of 10% and ad valorem tax on imports has been repealed by Executive Order No. 1062 effective January 1, 1986. As regards exemption from customs duties, please direct your request to the Commissioner of Customs who has jurisdiction on the matter. Very truly yours, (SGD.) BIENVENIDO A. TAN, JR. Commissioner