ITAD Ruling No. 085-02

May 9, 2002 ITAD RULING NO. 085-02 NIRC,Secs. 101, 105, 107, 131, 149 & 204 BIR Ruling No. ITAD-122-01 Kaisahang Buhay Foundation, Inc. #56 10th Avenue, Cubao Quezon City Attention: Rosario B. Dela Rosa Executive Director Gentlemen : This refers to your letter dated April 24, 2002 requesting that the donation made by Mr. and Mrs. Eric and Linda Kehew of the United States Embassy of one (1) unit Nissan Pickup Model 1987 in favor of the Kaisahang Buhay Foundation, Inc. (KBF) be exempt from Philippine taxes. It is represented that KBF is a non-stock, non-profit, non-government organization duly licensed and accredited by the Department of Social Welfare and Development (DSWD) as a Child, Women, Family welfare agency; that it is likewise accredited by the Philippine Council for NGO Certification (PCNC) and duly certified/registered by the Bureau of Internal Revenue as a donee institution per Certificate of Registration issued by this Bureau dated January 21, 2001; that Mr. and Mrs. Kehew of the United States Embassy imported tax free the subject motor vehicle with Chassis No. JN6ND11S8HWD45130, and Engine No. Z24-988670; and that the subject motor vehicle is being donated to KBF. As regards your query pertaining to the donor's tax, please be informed that Section 101(B)(2) of the Tax Code of 1997 provides, viz : "Sec. 101. Exemption of Certain Gifts . The following gifts or donations shall be exempt from the tax provided for in this Chapter: (B) In the Case of Gifts Made by a Nonresident not a Citizen of the Philippines. "xxx xxx xxx" (2) Gifts in favor of an educational and/or charitable, religious, cultural or social welfare corporation, institution, foundation, trust or philanthropic organization or research institution or organization: Provided, however, That not more than thirty percent (30%) of said gifts shall be used by such donee for administration purposes. "xxx xxx xxx" Based on the aforequoted provision, since KBF is a duly accredited child, women and family welfare organization and a registered donee institution with this Bureau, this Office is of the opinion and so holds that the donation made by Mr. and Mrs. Kehew, who are non-residents and not citizens of the Philippines, of the subject motor vehicle to KBF is exempt from donor's tax. However, with respect to the value-added (VAT) and ad valorem taxes, Sections 107(B) and 131(A) of the National Internal Revenue Code of 1997 (Tax Code of 1997)provide that in cases of subsequent sale, transfer, and exchange of tax-free imported goods or articles by tax-exempt persons or entities or agencies to non-exempt persons or entities, the non-exempt 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 also constitute a lien on the goods superior to all charges or liens on the goods, irrespective of the possessor thereof. Pertinent to the foregoing, Sections 105 and 149 of the Tax Code of 1997 further provide as follows: "Sec. 105. Persons Liable . Any person who, in the course of trade or business, sells, barters, exchanges, leases goods or properties, renders services, and any person who imports shall be subject to the value-added tax (VAT) imposed in Sections 106 to 108 of this Code." (emphasis supplied) "Sec. 149. Automobiles. There shall be levied, assessed and collected an ad valorem tax on automobiles based on the manufacturers or importer's selling price, net of excise and value-added tax . . ." Accordingly, having been considered to be the importer of the subject motor vehicle, KBF shall be liable for the payment of the 10 percent VAT for its importation. Furthermore, as the configuration of the Nissan Pickup falls within the definition of "automobile," under Section 2(A) of Revenue Regulations 14-99, its importation is likewise subject to ad valorem tax. In this connection, KBF is required to file BIR Form No. 2200 (Excise Tax Return for Automobiles and Non-Essentials) with the Revenue District Office (RDO) where KBF is registered or required to be registered and pay the excise tax therein within 10 days from the date of transfer or disposition of the subject motor vehicle (Revenue Regulations 1-2002). Moreover, the computation of the amount of VAT and ad valorem tax payable by KBF may also be processed by the same RDO. Finally, as it is represented that your Office may not be able to pay the corresponding taxes to be levied on the said donation, more particularly from VAT and ad valorem , please be informed that it is only the Commissioner of Internal Revenue (CIR) who has the authority to compromise or abate taxes pursuant to Section 204 of the Tax Code of 1997. In this regard, KBF is advised to file with the Office of the CIR a separate petition for abatement or compromise of tax on the ground of inability to pay assessed tax. This ruling is issued on the basis of the foregoing facts as represented. However, if upon investigation it shall be discovered that the facts are different, then this ruling shall be considered null and void. Very truly yours, Commissioner of Internal Revenue By: (SGD.) MILAGROS V. REGALADO Assistant Commissioner Legal Service