Implementing Section 2 of Presidential Decree No. 439

July 3, 1974 REVENUE REGULATIONS NO. 06-74 SUBJECT : Implementing Section 2 of Presidential Decree No. 439 dated April 22, 1974 giving certain tax holiday benefits to all overseas Filipinos settling permanently in the Philippines TO : All internal revenue officers and others concerned Pursuant to Section 2 of Presidential Decree No. 439, the following regulations giving certain tax holiday benefits to overseas Filipinos who are coming to settle permanently in the Philippines are hereby promulgated for the guidance of all concerned and shall be known as Revenue Regulations No. 6-74. SECTION 1. Scope . These regulations shall govern the tax holiday benefits given to overseas Filipinos settling permanently in the Philippines in their purchase of locally manufactured vehicles household appliances, professional instruments and other tools of trade, occupation or employment, as provided for in Section 2 of Presidential Decree No. 439 which is quoted hereunder: "Sec. 2. Provisions of Sections 184, 184-A; 185; 185-A; 185-B; 186; 186-A; and 186-B of the Internal Revenue Code, as amended, to the contrary notwithstanding, Overseas Filipinos as herein defined who are coming to settle permanently in the Philippines may purchase locally manufactured vehicles, household appliances, professional instruments and other tools of trade, occupation or employment, free of internal revenue taxes; Provided: cd a. Such items are purchased from authorized dealers and are brand new; b. In the case of vehicles, that the same are registered under the Progressive Car Manufacturing Program; c. In the case of household appliances, professional instruments and other tools of trade, occupation or employment, that the same are locally manufactured and/or assembled; d. That the purchase are made locally and in United States currency; e. That the purchases are made within a period of six (6) months from the date of arrival." SECTION 2. Nature of Tax Exemption . Tax exemption is given on the purchase of only one piece/unit/set of locally manufactured vehicles, household appliances, professional instruments and other tools of trade, occupation or employment. The term "household appliances" shall include, but not limited to: air conditioner, radio, stereo, television set, refrigerators, cooking appliances, electric fans. aisa dc The tax exemption is given only on the first purchase which shall be made within six (6) months from the date of arrival. Subsequent purchases of articles similar to those previously purchased and given tax exemption shall be subject to the regular tax. SECTION 3. Who can avail . Overseas Filipinos who have become permanent residents or naturalized citizens of the United States or other foreign countries and who have signified their desire to become permanent residents of the Philippines can avail of the tax exemption. Hence, a Balik-bayan participant who will return to the country where he came from after a visit in the Philippines cannot avail of this tax exemption. SECTION 4. Proofs required for availment . An overseas Filipino who wants to avail of the tax exemption shall present the following proofs: a. Passport wherein it is stamped LOI 163. b. Identification Card issued by the Bureau of Immigration indicating proof of change of permanent address. SECTION 5. Nature of articles purchased . The articles to be purchased must be brand new and locally manufactured and/or assembled. SECTION 6. From whom purchased . The tax-free purchase must be made either from the manufacturer of the particular article or from its authorized dealer or distributor. In the case of vehicles, the manufacturer thereof must be registered under the Progressive Car Manufacturing Program. SECTION 7. Period of Purchase . To avail of the tax exemption the tax-free purchase must be made within six (6) months from the date of arrival in the Philippines. SECTION 8. Currency Used . The payment of the purchased articles shall be made in United States currency in order to avail of the tax exemption. Since the price of the purchased article is expressed in Philippine peso, the same shall be converted to US dollar under the current conversion rate. If the purchaser has another foreign currency the same should first be converted to US currency. SECTION 9. Period covered by the tax incentives . Pursuant to LOI 163, the Homecoming Season or the Balikbayan program has been extended up to August 31, 1974. Therefore, this tax exemption privilege shall apply to an overseas Filipino mentioned in Section 3 provided that he arrives in the Philippines on or before August 31, 1974. SECTION 10. Procedure for availment of the tax exemption privilege . a. In the case of direct purchase from the manufacturer : (1) The Overseas Filipino desiring to avail of the tax exemption privilege may request in writing with the Commissioner of Internal Revenue, Attention : BUSINESS TAX DIVISION . The request shall contain the kind, quantity and manufacturer of the articles to be purchased and whether the same shall be for his own personal use. Upon receipt of the request, the Chief, Business Tax Division shall require from the prospective purchaser the proofs mentioned in Section 4. If the purchaser is qualified to avail of the exemption, a purchase order shall be issued in favor of the purchaser and addressed to the manufacturer/dealer. (2) If both the manufacturer/dealer and the purchaser have agreed to consummate the sales transaction, the former shall prepare an invoice showing the selling price, exclusive of the sales tax, in Philippine and US Currency, and the amount of sales tax due thereon. These amounts must be indicated separately in the invoice. Said invoice shall also state distinctly the full name of the purchaser, his new residence in the Philippines, his date of arrival in the Philippines and Passport Number. (3) The manufacturer shall annotate in the passport of the purchaser the kind of article purchased, the amount paid expressed in US currency and the date of purchase. (4) The manufacturer shall file with the Bureau of Internal Revenue within twenty (20) days after the end of each month a statement showing the article or articles purchased from him or it during the preceding month and the total amount paid in US currency. Said statement shall also certify that the US currency derived from the sales has been duly deposited in a local commercial bank (indicate name of bank) or reported to the Central Bank. b. In the case of purchase from an authorized dealer : (1) The dealer shall follow the above procedure contained in Nos. (1) to (4). (2) After the sale transaction, the dealer shall present to the manufacturer a copy of the sales invoice issued by him covering the tax-free purchase. If the manufacturer had already paid the sales tax on the articles so sold and such tax was passed on to the dealer, such manufacturer shall pay said tax to the dealer. Thereafter, the manufacturer shall claim tax credit of said tax from the Commissioner of Internal Revenue by complying with the provisions of Section 309 of the Tax Code. SECTION 11. Two-year holding period, prohibition . The purchaser shall hold the purchased article for his own personal use for a period of at least two (2) years from the date of purchase. The purchased article shall be subject to the corresponding tax; payable by the purchaser or transferee, under the following circumstances: a. Except if the transfer is by inheritance, the purchased article is sold, bartered, exchanged or transferred within the two-year period; or b. If the purchaser finally decides within the two-year period to abandon his permanent residence status in the Philippines and leaves for abroad. SECTION 12. Effectivity . These regulations shall take effect immediately. CESAR VIRATA Secretary of Finance Recommended by: MISAEL P. VERA Commissioner of Internal Revenue TAN 1601-593-5