Continued Grant of the 50% Reduction in All PEZA Processing Fees for Ecozone Import/Export Full-Container Load Shipments via the Batangas International Port

July 22, 2002 ITAD RULING NO. 125-02 Memorandum of the Executive Secretary dated August 15, 1973 DFA's Letter No. 37941 Asian Development Bank 6 ADB Avenue, 1057 Mandaluyong City Attention: Parvez Imdad Head, Shipping Section Gentlemen : This has reference to your letter dated August 31, 2001 requesting for exemption from payment of value-added tax (VAT) and ad valorem tax of the local purchase of three (3) motor vehicles: 1) One (1) unit Toyota Corolla Altis, A/T, Model 2001 2) One (1) unit Kia Carnival, A/T, Model 2001 3) One (1) unit Mitsubishi Pajero 2.8, A/T, Model 2001 for the personal use of Mr. Ayato Hirano, Mr. Leonardus Boenawan Sondjaja and Mr. Katsuji Matsunami, respectively of the Asian Development Bank (ADB). It is represented that Mr. Hirano is an Energy Specialist (Financial Analyst) of the Energy Division East, IEEN, Mr. Sondjaja is a Consulting Services Specialist of the Consulting Services Division, COCS and Mr. Matsunami is a Senior Project Engineer of the Forestry And Natural Resources Division West, AWFN of the ADB; that the abovementioned ADB staff members will respectively purchase the aforementioned motor vehicles locally for their personal use; that the Department of Foreign Affairs favorably endorsed the instant request in its Office of Protocol Letter No. 37491 dated December 24, 1999, stating that "qualified Bank staff can purchase a second tax-free locally produced vehicle within the first year of their assignment as initial privilege, even if they have already purchased tax-free a locally produced vehicle for their first motor vehicle"; and that the qualified Bank staff members have not yet exhausted their two tax-free motor vehicles privilege. In reply, please be informed that the Memorandum of the Executive Secretary of the Office of the President of the Philippines dated August 15, 1973 as implemented by Department Order No. 43-92 dated October 13, 1989 provides, viz : "1. In connection with the request of the Asian Development Bank that each member of its professional staff be allowed to import two (2) tax-exempt automobiles, I wish to inform you that the request is hereby approved, provided that: that the exemption shall be extended only to staff members in the professional or higher level, and (iv) that the payment be made in a foreign currency acceptable as part of the international reserves of the Philippines. "2. The request by the Bank for its staff who are at higher or equivalent level to Administrative Assistant to import one (1) duty free automobile is likewise approved, subject to the four conditions cited above. "3. All previous arrangements relating to the matter are hereby modified." Based on the above, each staff member of ADB in the professional or higher level is given the option to purchase a second motor vehicle locally assembled drawn from those covered by the Progressive Car Manufacturing Program (PCMP) to be paid for in a foreign currency acceptable as part of the international reserves of the Philippines. This is in line with the Philippine government's policy to spur the growth of the domestic car industry, as can be gleaned from the aforequoted Memorandum. This privilege may be availed of by the qualified bank staff, even after the first purchase of a tax-free locally assembled motor vehicle. The availment of this option shall, however, automatically suspend the privilege to import, tax-free, a foreign-made motor vehicle until the scheduled replacement time or after three (3) years, pursuant to Letter No. 37491 from the Office of Protocol, Department of Foreign Affairs signed by the Director for Privileges and Immunities, Mr. Wilfredo D. Maximo dated December 24, 1999. Considering that Mr. Hirano, Mr. Sondjaja and Mr. Matsunami are members of ADB's professional staff per Department of Finance indorsement to the Commissioner of Internal Revenue dated August 27, 2001 and considering further that herein purchases meet the required conditions set forth in the aforecited Memorandum, with a favorable recommendation and approval from the Office of Protocol, Department of Foreign Affairs, this office is of the opinion and so holds that the herein local purchases of three (3) motor vehicles, for the personal use of Mr. Ayato Hirano, Mr. Leonardus Boenawan Sondjaja and Mr. Katsuji Matsunami, are exempt from VAT and ad valorem taxes, pursuant to the Memorandum of the Executive Secretary dated August 15, 1973. This ruling is issued on the basis of the foregoing representations. However, if upon investigation it shall be disclosed or discovered that the facts are different, then this ruling shall be considered null and void. Very truly yours, (SGD.) REN G. BAEZ Commissioner of Internal Revenue