BIR Ruling No. OT-007-2025: Tax Implications on Pontoon Boats Imported for Display

BIR Ruling No. OT-007-2025 sheds light on the application of excise taxes to imported pontoon boats and their classification under the National Internal Revenue Code (“NIRC”) of 1997, as amended.

CPT Central Corporation (“CPT”) imported two (2) units of brand-new Aluminum Double Decker Pontoon boats, along with accessories but without engines. The boats were intended for use as decorations or displays at one of CPT’s properties under construction. They were not meant for domestic transportation, which is why they were imported without engines.

Upon importation, the Bureau of Customs (“BOC”) assessed a 20% excise tax on the pontoon boats, based on Section 150(c) of the NIRC, which specifically targets yachts and vessels intended for pleasure or sports. This led CPT to request a ruling from the BIR confirming that the imported boats were not subject to excise tax and for a refund of the excise tax already paid under protest.

Under Section 150 of the NIRC, as amended, a 20% excise tax is levied on certain non-essential goods, including yachts and other vessels intended for pleasure or sports. This provision clearly highlights that the excise tax applies to vessels intended for pleasure or sports. Therefore, the crux of the issue in this case is whether the pontoon boats imported by CPT can be classified as vessels intended for such purposes.

To determine if the pontoon boats are subject to excise tax, we must first consider whether these boats can be classified as “vessels” under the law. According to Republic Act No. 9295, the term “vessel” is defined as:

“‘Ship’ or ‘Vessel’ may be used interchangeably and shall mean any kind, class, or type of craft or artificial contrivance capable of floating in water, designed to be used, or capable of being used as a means of water transport in the domestic trade for the carriage of passengers or cargo, or both, utilizing its own motive power or that of another.”

This definition suggests that a vessel is any craft capable of floating in water and intended to be used for water transport, regardless of whether it has an engine or not. The lack of engines on the imported pontoon boats does not exclude them from this definition, as the law allows for vessels to use their own motive power or that of another. In this case, the pontoon boats meet the basic criteria for being classified as vessels, as they are artificial contrivances capable of floating in water and could be used for water transport.

While the pontoon boats may meet the definition of a vessel, the next key issue is whether they are intended for “pleasure or sports,” which is the condition for imposing the 20% excise tax under Section 150 of the NIRC. To answer this question, it is important to examine how the terms “pleasure” and “sports” are defined in the context of Philippine law.

The term “pleasure” is commonly used in the law but is also subject to interpretation. Fortunately, the NIRC traces its origins back to Presidential Decree No. 1158 (“PD No. 1158”), which provides further clarity. Section 26 of PD No. 1158 groups “pleasure” together with recreation and other non-profitable purposes, as seen in the following provision “Sec. 26. Exemptions from tax on corporations. — (h) Club organized and operated exclusively for pleasure, for recreation, and other non-profitable purposes.” This grouping suggests that “pleasure” should be understood as a non-profitable activity, akin to recreation, rather than a commercial or income-generating venture.

In this case, CPT has stated that the imported pontoon boats are intended solely for display purposes, as confirmed by the Maritime Industry Authority. Since their use is not for profit and is instead for decorative purposes, the boats can be categorized as being intended for “pleasure,” as defined in the law.

In conclusion, the ruling in BIR Ruling No. OT-007-2025 confirms that the two imported units of brand-new Aluminum Double Decker Pontoon boats fall within the category of vessels intended for pleasure, and therefore, are subject to the 20% excise tax on non-essential goods under Section 150 of the NIRC. Although the boats are not used for transportation and lack engines, their status as vessels designed for non-profitable, recreational use aligns with the legal interpretation of “pleasure” and thus qualifies them for excise taxation.