BIR to collect VAT on auction sale of imported vehicles

The Bureau of Internal Revenue (BIR) can now proceed with the assessment and collection of value-added tax (VAT) from the auction sale of imported motor vehicles through the free port zones following the decision of the Court of Appeals to lift the injunction of Olongapo Trial Court Judge Ramon Caguia that temporarily stopped the implementation of a BIR circular which would tax imported vehicles sold through a public auction.

The BIR can also proceed with the assessment and collection of the regular income tax on consignees-auctioneers whose total income generated from sources within the customs territory exceeds 30 percent of total income derived from all sources.

Industry estimates the collection to reach P2.8 billion.

The taxation of imported vehicles, especially those that come in through the Subic Free Port, has been a contentious issue.

The government had received numerous complaints that the importation and sale of imported used vehicles is adversely affecting the country’s still struggling motor vehicle development program.

Industry sources also said the entry of second-hand imported vehicles poses safety and environmental concerns because they do not have to meet the required safety and environmental standards unlike that of locally-assembled cars.

The government, in an effort to appease the local motor vehicle manufacturers, had decided to limit the duty-free importation of used vehicles to specialty vehicles such as firetrucks and ambulances and a few other.