ITAD Ruling No. 053-00

March 7, 2000 ITAD RULING NO. 053-00 Sec. 107 Sec. 129 Embassy of the Republic of Argentine 6th Floor, ACT Tower, 135 S. G. Puyat Avenue, Salcedo Village, Makati City Attention: Mr . Jose Maria Venere Counsellor Gentlemen : This refers to your letter dated February 15, 1999 inquiring on how much taxes will be paid by a prospective non-privilege buyer of your car, a 1994 Model ISUZU Trooper. cdll In this connection, we would like to inform you of the provisions which govern the imposition of Philippine tax on imported automobiles. Sec 129 of the National Internal Revenue Code of 1997 (NIRC) provides as follows: "Sec. 129. Goods Subject to Excise Taxes . Excise taxes apply to goods manufactured or produces in the Philippines for domestic sale or consumption or for any other disposition and to things imported. The excise tax imposed herein shall be in addition to the value-added tax imposed under Title IV. (emphasis supplied) xxx xxx xxx On the subsequent sale/transfer of tax-exempt automobiles, Section 7(d) of Revenue Regulations No. 14-97 provides that the value of the automobile at the time of sale, transfer, or exchange should be based on its depreciated value of 10% each year but in no case shall the allowable charge for depreciation will be more than 50% of the original cost or value. Moreover, Section 107, of the NIRC provides as follows: "SEC. 107. Value-added Tax on Importation of Goods . "(A) In General . There shall be levied, assessed and collected on every importation of goods a value-added tax equivalent to ten percent (10%) based on the total value used by the Bureau of Customs in determining tariff and customs duties, plus customs duties, excise taxes, if any, and other charges, such tax to be paid by the importer prior to the release of such goods from customs custody: Provided, That where the customs duties are determined on the basis of the quantity or volume of the goods, the value-added tax shall be based on the landed cost plus excise taxes, if any." "(B) Transfer of Goods by Tax-exempt Persons . In the case of tax-free importation of goods into the Philippines by persons entities or agencies exempt from tax where such goods are subsequently sold, transferred or exchanged in the Philippines to non-exempt persons or entities, the purchasers, transferees or recipients shall be considered the importers thereof, who shall be liable for any internal revenue tax on such importation. The tax due on such importation shall constitute a lien on the goods superior to all charges or liens on the goods, irrespective of the possessor thereof." (emphasis supplied) In view of this, the non-privilege/non-exempt buyer of your car will have to pay for the VAT and excise taxes due on the importation of the car. As regards the computation of the tax due, please be informed that your letter has been forwarded to the Excise Tax Service, which has proper jurisdiction over the case. Any further communication regarding excise tax should be addressed to Mr. Leonardo B. Albar, Assistant Commissioner, Excise Tax Service. Very truly yours, (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner Legal and Enforcement Group