ITAD BIR Ruling No. 044-12

February 9, 2012 ITAD BIR RULING NO. 044-12 Sections 98 (A), 101, 149 and 188 National Internal Revenue Code of 1997, as amended; BIR Ruling No. ITAD 229-11 Department of Energy Energy Center Merritt Road, Fort Bonifacio Taguig City Attention: Mario C. Marasigan Director Overall CBRED Project Director Gentlemen : This refers to your letter dated July 7, 2011 requesting confirmation on the applicable taxes on the transfer by the United Nations Development Programme ("UNDP") to the Department of Energy ("DOE") of the following motor vehicles: Motor Vehicle No. 1 Motor Vehicle No. 2 Make Ford Ranger 4x4 Pick-up Toyota Revo VX200 MT Model 2003 2003 Color Dark Blue 3BS DN Silver Blue Engine No. WLAT-381778 1RZ-3124245 Chassis No. MNLCSFE403W331300 RZF82-0003312 Plate No. OEV-22817 OEV-22818 As a background, the vehicles were funded through the Global Environment Facility to be used in the Capacity Building to Remove Barriers to Renewable Energy Development in the Philippines ("CBRED") Project implemented by the DOE, but procured by the UNDP at the time when it was the administrative arm of the Project on the basis of a Cost Sharing Agreement. The vehicles were procured tax-free from local distributors. Based on the Agreement, ownership of the vehicles will be transferred to the DOE after termination of the Project and upon donation of the vehicles by the UNDP to the DOE. On June 27, 2011, a Deed of Donation and Transfer of Title of Assets was entered into for this purpose where UNDP, through its Philippine Country Office, donated to the DOE (and which the latter accepted) the subject vehicles including the parts and accessories forming part thereof. This undertaking was part of the assistance given by the UNDP to the Philippine Government. SIAEHC Relative thereto, please be informed as follows: A. Donor's tax Under Section 101, in relation to Section 98 (A), of the National Internal Revenue Code of 1997 ("Tax Code"), as amended, since the motor vehicles were donated to the DOE, an agency of the Philippine Government, the donation is exempt from donor's tax, thus: "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." "SEC. 101. Exemption of Certain Gifts. The following gifts or donations 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" (Emphasis ours) (BIR Ruling No. ITAD 229-11 dated September 21, 2011) B. Excise tax However, under Section 149 of the Tax Code, in relation to Section 8 of Revenue Regulations No. 25-2003, 1 the donated motor vehicles are subject to excise tax which was not previously imposed at the time of their purchase by the UNDP, a tax-exempt entity, thus: "SEC. 149. Automobiles. There shall be levied, assessed and collected an ad valorem tax on automobiles based on the manufacturer's or importer's selling price, net of excise and value-added tax, in accordance with the following schedule: TcEaAS Net manufacturer's price/ Rate importer's selling price Up to P600 Thousand 2% Over P600 Thousand to P1.1 Million P12,000 + 20% of value in excess of P600 Thousand Over P1.1 Million to P2.1 Million P112,000 + 40% of value in excess of P1.1 Million Over P2.1 Million P512,000 + 60% of value in excess of P2.1 Million" "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. However, in case where the automobile was acquired by the tax-exempt person or entity prior to but sold after the effectivity of the Act, the computation of the ad valorem tax shall be governed by the Act." (BIR Ruling No. ITAD 229-11 dated September 21, 2011) Relative thereto, the excise tax due on the vehicles is deemed automatically appropriated from the National Budget pursuant to Section 13 of the General Appropriations Act of 2011, 2 thus: "SEC. 13. National Internal Revenue Taxes and Import Duties. The following are deemed automatically appropriated: (a) National internal revenue taxes and import duties payable by national government agencies to the National Government arising from foreign donations, grants and loans; xxx xxx xxx The amounts pertaining to such taxes, and duties covered by this section shall be considered as revenue and expenditure of the government. Implementation of this section shall be in accordance with guidelines jointly issued by the DOF and DBM." C. Documentary stamp tax cSITDa Furthermore, under Section 188 of the Tax Code, the Deed of Donation for the vehicles is subject to documentary stamp tax of P15.00, thus: "SEC. 188. Stamp Tax on Certificates. On each certificate of damages or otherwise, and on every certificate or document issued by any customs officer, marine surveyor, or other person acting as such, and on each certificate issued by a notary public, and on each certificate of any description required by law or by rules or regulations of a public office, or which is issued for the purpose of giving information, or establishing proof of a fact, and not otherwise specified herein, there shall be collected a documentary stamp tax of Fifteen pesos (P15.00)." This ruling is issued on the basis of the facts as represented. However, if upon investigation it shall be disclosed that the actual facts are different, then this ruling shall be without force and effect insofar as the herein parties are concerned. Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue Footnotes 1. Amended Revenue Regulations Governing the Imposition of Excise Tax on Automobiles pursuant to the Provisions of Republic Act No. 9224, An Act Rationalizing the Excise Tax on Automobiles, Amending for the Purpose the National Internal Revenue Code of 1997, and for Other Purposes. 2. Republic Act No. 10147.