And with the heavy traffic comes vehicle exhaust fumes, which, as we know, pose a serious health and environmental risk.

This makes you want to skip taking your car, and instead walk all the way to work (plus points for the environment; negative points for your health). For those thinking of purchasing a new car, one might want to consider an environmentally-safe vehicle, which are the purely electric vehicles (EV), or hybrid electric vehicles (HEV). The more famous of the EVs is the Tesla, while most of the leading car manufacturers have an HEV variant.

With that in mind, how are EVs and HEVs defined? Curiously, Revenue Regulations (RR) 5-2018, which implements the excise tax rates on automobiles under the Tax Reform for Acceleration and Inclusion (Train) Law, defines an HEV as a motor vehicle powered by electric energy in combination with gasoline, diesel, or any other motive power. The definition is curious as it defines both EVs and HEVs: if it runs purely on electric power, it’s an EV; if it’s a combination of electric power and diesel, for example, it’s an HEV.

As to whether a vehicle is an EV or a HEV is important as it determines whether or not excise taxes will be imposed. Under RR 5-2018, EVs are exempt from the excise tax on automobiles, while HEVs are subject to 50 percent of the applicable excise tax rate. Note that the Train Law provides for graduated excise tax rates on automobiles based on the manufacturer’s selling price. So, if an HEV has a selling price of P1,500,000, the amount of excise tax would be P150,000 (50 percent of the 20 percent normal excise tax rate).

Considering that the determination on whether a vehicle is an EV or HEV is crucial, for excise tax purposes, who makes that determination? Under RR 5-2018, prior to the removal of the vehicle from the manufacturing plant or customs custody, the Department of Energy (DoE) shall make the determination on whether it is an EV or an HEV. Lately however, the Department of Finance has issued RR 24-2018, reflecting certain changes in the determination process:

The Environment Management Bureau of the Department of Natural Resources (DENR) will now be the agency responsible for issuing to the vehicle manufacturer a Certificate of Conformity (COC). The COC contains information on the vehicle’s model/make and other technical information from which it can be ascertained whether the vehicle is an HEV;

In case the vehicle is an EV, a certificate of non-coverage (CONC), will instead be issued by the DENR, certifying that the vehicle applied for is a purely electric vehicle with no tailpipe emissions;

The Bureau of Internal Revenue shall make a determination whether the EV or HEV is exempt, or subject to 50 percent excise tax, on the basis of the CONC or COC issued by the DENR.

Manila Times Source

ATTY. PEACHES ARANAS

Managing Partner LMA LAW