Department of Agriculture

October 4, 2022 DA ITAD BIR RULING NO. 045-22 Section 101, NIRC of 1997, as amended; RR No. 25-03; BIR Ruling No. ITAD-022-20 Department of Agriculture Bureau of Agricultural Research RDMIC Bldg., Elliptical Rd. cor. Visayas Ave. Diliman, 1104 Quezon City Attention: Dr. Sailila E. Abdula Director Gentlemen : This refers to your letter dated September 23, 2022 requesting for a clearance in connection with the donation of two (2) motor vehicles described below by the International Rice Research Institute (IRRI) in favor of the Department of Agriculture-Bureau of Agricultural Research (DA-BAR). Make Model Year Chassis Number Engine Number Toyota Altis Sedan 2006 ZZE122-9004081 1ZZ-4526659 Toyota Altis Sedan 2006 ZZE122-9004123 1ZZ-4529417 Documents show that on May 17, 2022, the IRRI, represented by Director Olawale Fajobi, Human Resources and Organizational Development, executed a Deed of Donation over the subject motor vehicles in favor of the DA-BAR, represented by Director Junel B. Soriano. The DA-BAR, in turn, accepted the said donations in the same deed. In reply, please be informed as follows: As to the donor's tax liability, Section 98 of the National Internal Revenue Code (Tax Code) of 1997, as amended, provides that transfers by gift of property, real or personal, are generally subject to tax, to wit: " CHAPTER II DONOR'S TAX SEC. 98. Imposition of Tax. (A) there shall be levied, assessed, collected and paid upon the transfer by any person, resident or nonresident, of the property by gift, a tax, computed as provided in Section 99. (B) the tax shall apply whether the transfer is in trust or otherwise, whether the gift is direct or indirect, and whether the property is real or personal, tangible or intangible. xxx xxx xxx" Nevertheless, if the donations were made in favor of, or were intended for the use of, the national government, no donor's tax shall be imposed on such donations pursuant to Section 101 (A) (2) of the Tax Code, thus: " SEC. 101. Exemption of Certain Gifts . The following gifts or donation shall be exempt from the tax provided for in this Chapter: (A) In the Case of Gifts Made by a Resident . xxx xxx xxx (2) Gifts made to or for the use of the National Government or any entity created by any of its agencies which is not conducted for profit, or to any political subdivision of the said Government; and xxx xxx xxx" Accordingly, since the DA-BAR is an agency of the Government of the Republic of the Philippines, the subject transfer is hereby declared as exempt from donor's tax . While exempt from donor's tax, the subsequent transfer of locally manufactured or assembled motor vehicles to a non-privileged buyer shall, however, be subject to ad valorem tax . Section 3 of Revenue Regulations (RR) No. 25-2003 states, to wit: " SEC. 3. PERSONS LIABLE . The following persons shall be liable for the payment of ad valorem tax on automobiles : a. On locally manufactured/assembled automobiles The excise tax shall be paid by the manufacturer/assembler of automobiles. Should domestically manufactured/assembled automobiles be removed from the place of manufacture/assembly without the payment of the tax, the dealer/trader, owner, or person having possession thereof shall be liable for the excise tax due thereon. In case of transfer of locally manufactured/assembled automobiles from a tax-exempt person to a non-tax exempt individual or entity, the transferee or possessor thereof shall be the one liable for the excise tax . xxx xxx xxx" (Emphasis supplied) Based on the foregoing, the subsequent transfer of locally manufactured/assembled and imported motor vehicles from a tax-exempt person to a non-tax exempt individual or entity, either by way of sale, donation or any other mode of transfer, shall make the purchaser, transferee or possessor thereof liable for the ad valorem tax due on such motor vehicles, which shall be computed based on Section 8 of RR No. 25-2003: " SEC. 8. TAX TREATMENT ON SUBSEQUENT SALE, TRANSFER OR EXCHANGE OF TAX-EXEMPT AUTOMOBILE BY A TAX-EXEMPT PERSON/ENTITY TO A NON-EXEMPT PERSON/ENTITY . In cases where a tax-exempt person/entity acquired an automobile, whether locally purchased or imported, without payment of the tax by reason of his/their exemption, the purchase thereof by a non-exempt person/entity shall be subjected to the ad valorem tax based on the higher of (i) actual consideration between the tax-exempt person/entity and the non-exempt person/entity; or (ii) the depreciated value of the automobile at the time of sale, transfer, or exchange which depreciation rate shall be at ten percent (10%) per year, but in no case shall the total amount of depreciation be more than fifty percent (50%) of the original cost or value . xxx xxx xxx" Please be guided accordingly. Very truly yours, Commissioner of Internal Revenue By: (SGD.) LARRY M. BARCELO Assistant Commissioner Legal Service