Procedure Governing the Processing and Issuance of the Certificates of Payment of Internal Revenue Taxes for Purposes of Registering Motor Vehicles

September 20, 1989 REVENUE MEMORANDUM ORDER NO. 42-89 SUBJECT : Procedure Governing the Processing and Issuance of the Certificates of Payment of Internal Revenue Taxes for Purposes of Registering Motor Vehicles TO : All Internal Revenue Officers and Others Concerned To implement the memorandum of Agreement between the Bureau of Internal Revenue and the Land Transportation Office dated September 10, 1987, Revenue Memorandum Order No. 44-87 dated December 18, 1987 was issued. The Order covered motor vehicles that were of 1985 or earlier models, for it was thought that the problems concerning "chopped vehicles" were temporary in character and could be solved within a short period of time. However, it turned out that the registration of these vehicles continue to be problematic. On the part of the Bureau of Customs, imported CKD parts used in the assembly of the motor vehicle cannot be traced if the necessary customs duties and advance sales tax or value added tax were paid. On the part of the Land Transportation Office, owners of vehicles which have already been registered are required to present certificates of tax payments upon renewal of registration. And on the part of the Bureau of Internal Revenue, the assemblers of the motor vehicles, who are, legally speaking, the ones subject to sales tax or value added tax and excise tax are not assessed deficiency taxes. Rather the buyers of the assembled (chopped) vehicles are being required to pay the additional taxes. cd i Moreover, RMO 44-87 allowed the payment of compromise amounts based on the engine displacement and model of the vehicle that was of 1985 or earlier model. At the same time, said Order merely provided that motor vehicles that were of the 1986 or 1987 model and those that were classified as luxury cars shall be levied and assessed the appropriate rates of taxes prescribed in Sections 135-A (excise tax) and 163 (sales tax) of the Tax Code, without penalties. It did not identify which office or agency shall process and issue tax payment certificates for 1986 or later models. This Order, therefore, provides the guidelines and procedures in the issuance of certificates of tax payments by the BIR and other government agencies involved in the registration of vehicles: 1. This Order covers only motor vehicles that are imported and released from custom's custody and locally assembled vehicles sold in 1986 or thereafter. 2. No compromise of the internal revenue taxes due on the importation or sale of the vehicle shall be accepted. The appropriate taxes [advance sales tax or manufacturer's sales tax (Sec. 163), if imported or sold in 1986 or 1987, or the value added tax (Sec. 101), if imported or sold in 1988 or 1989 as well as excise taxes (Sec. 135-A for 1986-1987 models and Sec. 149 for 1988-1989 models) shall be collected without penalties. However, in no case shall the taxes to be collected from 1986-1987 models be lower than the amount of compromise prescribed in RMO 44-87. The waiver of penalties under Sec. 204 of the Tax Code shall apply only to vehicles imported or sold up to June 30, 1989, and the whole amount of deficiency taxes and penalties on vehicles imported or sold beginning July 1, 1989 shall be assessed and collected. casia 3. Applications for the processing and issuance of the certificates of tax payments for completely built units (CBU) imported into the country for which the correct taxes have not been paid shall be acted upon by the Bureau of Customs. In determining the amount of taxes due, the red book value of the vehicle shall be considered. However, the necessary Authority to Release Imported Goods (ATRIG) shall be processed by the BIR through the Sector Operations Service, in the case of value added tax, and the Excise Tax Service, in the case of excise tax. These documents shall become the basis for the issuance by the Bureau of Customs of the certificate of tax payment, which shall be presented to the Land Transportation Office, Diliman, Quezon City. 4. Payments of the internal revenue taxes due on the sale of "chopped vehicles" may be accepted by the Regional Director where the taxpayer resides. However, applications for the processing and issuance of the certificates of tax payments for 'chopped vehicles' shall be undertaken exclusively by the Regional Director, Revenue Region No. 4-A, Manila, in accordance with the provisions of the Memorandum of Agreement. Four (4) copies of the certificate (Annex 'B'), signed by the Manila Regional Director, shall be issued and distributed as follows: Original LTO Duplicate Taxpayer/owner of vehicle Triplicate Regional Director, Manila; Quadruplicate Regional Director where payment of tax was made. In order to ensure early action on all applications for the issuance of certificates of payments, it is instructed that Regional Directors who accepted tax payments must send, not later than two days after accepting payments, the copies of the payment order, confirmation receipt, and other relevant documents to the Regional Director Revenue Region No. 4-A, Manila, who shall immediately process the same and issue the necessary certificate if the papers are in order. The signed certificates should then be transmitted to the Land Transportation Office, Diliman, Quezon City. Said office shall give notice of the issuance of the certificate of payment to its district office which has jurisdiction over the vehicle and to the vehicle owner. aisa dc 5. A written report containing the following information shall be submitted by the Manila Regional Office to the Deputy Commissioner of Internal Revenue in charge of regional operations not later than the 20th day of the following month when the certificate was issued. (a) Name of registrant/owner; (b) Name and address of seller - assembler, if known; (c) Type and model of vehicle; (d) Certificate of tax payment number; and (e) Amount of taxes (sales tax, VAT, excise tax) paid; This Order shall take effect immediately. (SGD.) JOSE U. ONG Commissioner of Internal Revenue