Publishing Department Order No. 13-78

June 16, 1978 REVENUE MEMORANDUM CIRCULAR NO. 044-78 SUBJECT : Publishing Department Order No. 13-78 TO : All Internal Revenue Offices and Others Concerned For the information and guidance of all concerned, there is quoted hereunder the full text of Department Order No. 13-78: "Republic of the Philippines "Department of Finance "Office of the Secretary "Manila "DEPARTMENT ORDER NO. 13-78 "SUBJECT : Rules and Regulations to Implement Presidential Decree No. 1395, amending Presidential Decree No. 1352, entitled "Imposing a Five Percent Customs Duty and Five Percent Internal Revenue Tax in Lieu of the duty and/or Tax-Free Importation Privilege" "TO : The Commissioner of Customs The Commissioner of Internal Revenue And All Others Concerned "Pursuant to Presidential Decree No. 1395, amending Presidential Decree No. 1352 on May 31, 1978, the following rules and regulations are hereby issued for the effective implementation of the provisions of the Decree. "1. As a general rule, all importations which are at present totally or partially exempt from the payment of customs duties and/or internal revenue taxes under the provisions of any general or special law and special charters granting franchises, shall be subject to five percent customs duty and five percent internal revenue tax. "2. The five percent customs duty shall be based on the Home Consumption Value of the imported article as determined under Section 201 of the Tariff and Customs Code, as amended. In case of reappraisement, the reappraised value of the imported article as found by the appraiser and approved by the Collector shall be the basis of the duty imposable under the Decree. "3. The five percent internal revenue tax shall be levied, assessed and collected in accordance with the pertinent provisions of the National Internal Revenue Code, as amended. "4. The five percent customs duty and the five percent internal revenue tax shall not apply to the following: "(a) Those which are exempt in pursuance of or in compliance with international treaties or commitments, such as the ADB-RP Host Agreement (1966); the 1947 Convention on Privileges and Immunities of the United Nations and its specialized agencies; the United States Agency for International Development-RP Agreement; the 1947 Military Bases Agreement; and other similar treaties or commitments; "(b) Those which are exempt under the following Presidential Decrees: "(1) Presidential Decree No. 66; "(2) Presidential Decree No. 87; "(3) Presidential Decree No. 529; "(4) Presidential Decree No. 215; "(5) Presidential Decree No. 666; and "(6) Presidential Decree No. 972. "(c) Those importations granted duty exemption not as incentives under the provisions of Section 105 of the Tariff and Customs Code, as amended, except those specifically excepted under Section 2 of the Decree and those importations the internal revenue tax of which has been reduced by some incentives laws below the 5% minimum. "(d) Importations of machinery, equipment and spare parts shipped with such machinery and equipment made by enterprises registered with the appropriate government agency, on or before April 21, 1978, under any tax incentive law, subject to the following conditions: "(1) That the importation has been authorized by the appropriate government agency for the prosecution of specific projects already approved by the said agency as of April 21, 1978; and "(2) That such exemption shall not be authorized beyond December 31, 1981. "In cases where prior registration of an enterprise is not required by law nor by the appropriate agency implementing the tax incentive, this requirement for exemption shall be deemed waived: Provided, That it can be shown that an authority to import has been granted pursuant to a project already approved as of April 21, 1978. "5. The pertinent provisions of the following laws are hereby repealed or amended accordingly: "(a) Presidential Decree No. 218, as amended by Presidential Decree No. 348; "(b) Presidential Decree No. 413; "(c) Presidential Decree No. 440; "(d) Presidential Decree No. 535; "(e) Presidential Decree No. 538; "(f) Presidential Decree No. 634; "(g) Presidential Decree No. 992; "(h) Presidential Decree No. 1159; "(i) Republic Act No. 720; "(j) Republic Act No. 1370; "(k) Republic Act No. 2640; "(l) Republic Act No. 3470, as amended; "(m) Republic Act No. 5186, as amended; "(n) Republic Act No. 6135, as amended; and "(o) Other general and special laws, and special charters granting franchises. "6. The President may, in the interest of national economic development, upon recommendation of the Fiscal Incentives Review Board, restore any exemption benefit withdrawn under this Decree. "7. The customs duty and internal revenue tax imposed under the Decree shall be applied to importations entered or withdrawn for consumption on or after April 21, 1978 whether they enjoy total or partial exemptions and shall be paid before release of the shipment from customs custody. "In the case of importation enjoying partial exemption, the said duty and internal revenue tax shall be imposed on the exempt portion in addition to the duty and internal revenue tax due on the taxable portion. "Where the corresponding incentive law authorizes a deferral of the duty and internal revenue tax due from registered non-pioneer enterprises, the same privilege may be extended to registered pioneer enterprises by the appropriate implementing government agency. "8. All the existing procedures on the approval, documentation, processing, examination and release of shipments enjoying duty and tax exemption or franchise privileges, shall continue to be in force and effect and shall be followed and complied with. "In addition to the above requirements, any enterprise claiming exemption from the payment of duty and internal revenue tax under Section 1, No. 3 of P.D. 1352, as amended by P.D. 1395 shall submit to the Commissioner of Customs a certification from the appropriate implementing agency showing the following: "(a) That the enterprise has been duly registered, indicating the Certificate of Registration number and the date of registration. "(b) That the importation was made pursuant to an authority to import for a specific project already approved by the said agency as of April 21, 1978. "In cases where prior registration of an enterprise is not required by law nor by the appropriate agency implementing the tax incentive, this requirement for exemption shall be deemed waived: Provided, That it can be shown that an authority to import has been granted pursuant to a project already approved as of April 21, 1978. "9. For purposes of determining lawful entry under tariff and customs laws, all the requisites, limitations and conditions prescribed in the general or special law or charter granting the exemption or privilege and under which the importation was made, and all other customs requirements for entry shall continue to be observed and complied with. "10. Unless otherwise provided by law, in the case of importations subject to the five (5%) percent customs duty and five (5%) percent internal revenue tax herein imposed which are subsequently sold, transferred or exchanged to non-exempt persons or entities, the purchaser shall be considered the importer thereof and shall be liable for the difference between the full customs duty and internal revenue tax due thereon based on the depreciated value of the article at time of sale, transfer or exchange and the five (5%) customs duty and five (5%) percent internal revenue tax previously paid. The duty and tax due on such article shall constitute a lien on the article itself, superior to all other charges or lien irrespective of the possessor thereof. "11. Any situation not covered by the foregoing shall be resolved on a case-to-case basis by the Commissioner of Customs in consultation with the Secretary of Finance. "12. All existing customs and revenue rules and regulations or parts thereof inconsistent with this Order are hereby repealed and/or modified accordingly. "13. Presidential Decree No. 1395 took effect on May 31, 1978. However, any duty and internal revenue tax already paid on importations mentioned in No. 4(c) of this Order shall be recomputed in accordance with the provisions of this Decree upon filing of a formal claim for tax credit or refund by the enterprise concerned in accordance with existing rules and regulations governing such claims. "14. This Order shall take effect immediately. "(SGD.) CESAR VIRATA "Secretary of Finance All internal revenue officers and others concerned with the enforcement of internal revenue laws are hereby enjoined to be guided accordingly and to give the Department Order a wide publicity as possible. aisa dc EFREN I. PLANA Acting Commissioner of Internal Revenue TAN-P4519-F2828-A-8