June 29, 1995 BIR RULING NO.

100-95 148 101 (B) 000-00 100-95 Department of Transportation & Communications Philcomcen Building Ortigas Avenue, Pasig, Metro Manila Attention: Director Rebecca S. Cacatian Finance and Management Services Gentlemen : This refers to your letter dated February 6, 1995 requesting for an exemption from the payment of ad-valorem tax and value-added tax as the transferee of a motor vehicle, Toyota Corolla 1.5XL Model 1991, purchased and owned by the Asian Development Bank (ADB). It is represented that the aforesaid vehicle is a model 1991 Toyota Corolla with Engine Number 2E2211000. Chassis No. EE90-9053757, Certificate of Registration No. 08914386, Official Receipt No. 45415697, and Plate No. TAP 298; that it was purchased tax-free by Asian Development Bank on May 23, 1991 and use in its Technical Assistance Agreement in the Provincial Road Passenger Transport Study (PRPTS): and that under said agreement upon completion of the project your office will continue to use said vehicle. cdtech In reply, please be informed that pursuant to Sections 101 and 128 of the Tax Code, as amended, stating "SEC. 101. Value-added Tax on Importation of Goods.

"(a) In general. There shall be levied, assessed and collected on every importation of goods a value added tax equivalent to 10% based on the total value used by the Bureau of Customs in determining tariff and customs duties, plus customs duties, excise taxes, if any, and other charges, such tax to be paid by the importer prior to the release of such goods from customs custody; Provided, That where the customs duties are determined on the basis of the quantity or volume of the goods, the value-added tax shall be based on the landed cost plus excise taxes, if any. "(b) Transfer of goods by tax-exempt persons. In the case of tax-free importation of goods into the Philippines by persons, entities, or agencies exempt from tax where such goods are subsequently sold, transferred or exchanged in the Philippines to non-exempt persons or entities, the 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 constitute a lien on the goods superior to all charges or liens on the goods irrespective of the possessor thereof. "xxx "SEC. 128. xxx xxx

Payment of Excise Taxes on Imported Articles.

"(a) Persons liable. Excise taxes on imported articles shall be paid by the owner or importer to the customs officers, conformably with the regulations of the Department of Finance and before the release of such articles from the customhouse, or by the person who is found in the possession of articles, which are exempt from excise taxes other than those legally entitled to exemption. "In the case of tax-free articles brought or imported into the Philippines by persons, entities, or agencies exempt from tax which are subsequently sold, transferred or exchanged in the Philippines to non-exempt persons or entities, the purchasers or recipients shall be considered the importers thereof, and shall be liable for the duty and internal revenue tax due on such importation. The tax due on such article shall constitute a lien on the article itself, superior to all other charges or liens, irrespective of the possessor thereof. "(b) Rate and basis of the excise tax on importer articles. Unless otherwise specified, imported articles shall be subject to the same rates and basis of excise taxes applicable to locally manufactured articles." a tax-free vehicle acquired and subsequently sold by a tax-exempt entity to a non-exempt person shall be subject to VAT and to the exact tax, respectively, accordingly, since a 1991 Model Toyota Corolla falls under the category of automobile. When sold by a tax-exempt person to a non-exempt person, the latter shall become the person liable to the unpaid VAT and ad-valorem tax. In other words, as the transferee of the aforesaid vehicle, you are the person directly liable to the VAT and ad-valorem tax pursuant to Sections 101(b) and 149 in relations to Section 128 of the Tax Code, as amended. cdasia Very truly yours, (SGD.) RENE G. BAEZ Acting Commissioner

SECTION 4.107-1.

VAT on Importation of Goods.

(a) In general. VAT is imposed on goods brought into the Philippines, whether for use in business or not. The tax shall be based on the total value used by the BOC in determining tariff and customs duties, plus customs duties, excise tax, if any, and other charges, such as postage, commission, and similar charges, prior to the release of the goods from customs custody. In case the valuation used by the BOC in computing customs duties is based on volume or quantity of the imported goods, the landed cost shall be the basis for computing VAT. Landed cost consists of the invoice amount, customs duties, freight, insurance and other charges. If the goods imported are subject to excise tax, the excise tax shall form part of the tax base. The same rule applies to technical importation of goods sold by a person located in a Special Economic Zone to a customer located in a customs territory. No VAT shall be collected on importation of goods which are specifically exempted under Sec. 109 (1) of the Tax Code. (b) Applicability and payment. The rates prescribed under Sec. 107 (A) of the Tax Code shall be applicable to all importations withdrawn from customs custody. The VAT on importation shall be paid by the importer prior to the release of such goods from customs custody. "Importer" refers to any person who brings goods into the Philippines, whether or not made in the course of his trade or business. It includes non-exempt persons or entities who acquire tax-free imported goods from exempt persons, entities or agencies. (c) Sale, transfer or exchange of imported goods by tax-exempt persons. In the case of goods imported into the Philippines by VAT-exempt persons, entities or agencies which are subsequently sold, transferred or exchanged in the Philippines to non-exempt persons or entities, the latter shall be considered the importers thereof and shall be liable for VAT due on such importation. The tax due on such importation shall constitute a lien on the goods, superior to all charges/or liens, irrespective of the possessor of said goods.