Amendment to Act No. 1189, the Internal Revenue Code of 1904

November 7, 2005 ITAD RULING NO. 124-05 Sec 106 & 108 of the Tax Code 1997; Article 34, Vienna Convention BIR Ruling No. ITAD-110-04 Royal Embassy of Saudi Arabia 389 Sen. Gil J. Puyat Avenue Extension Makati City Gentlemen : This has reference to your Note No. 1112 dated September 14, 2005 referred to this Office by the Department of Finance (DOF) and the Department of Foreign Affairs (DFA), requesting for the exemption from payment of value-added tax (VAT) on the local purchase of one (1) motor vehicle, for the official use of the Royal Embassy of Saudi Arabia, specifically described as follows: Make: Toyota Camry 2.4E A/T Model Year: 2005 Color: Extreme Black Chassis Number: ACV30-9001616 Engine Number: 2AZ-1762488 In reply, please be informed that Article 34 of the Vienna Convention on Diplomatic Relations reads: "ARTICLE 34 "A diplomatic agent shall be exempt from all dues and taxes, personal or real, national, regional or municipal, except: "(a) indirect taxes of a kind which are normally incorporated in the price of goods or services; "xxx xxx xxx" Thus, tax exemption privilege of an Embassy and its diplomatic agents does not include exemption from the value-added tax (VAT) on its local purchases of goods and services. In other words, purchases by that Embassy and its diplomatic agents of goods and/or services shall be subject to the value-added tax prescribed under Sections 106 and 108 of the National Internal Revenue Code of 1997. However, applying the principle of reciprocity, this Office may grant exemption to the Royal Embassy of Saudi Arabia and/or its personnel on their local purchases of goods and/or services it appearing from the list submitted by the Department of Foreign Affairs as of June 3, 2005, that your Government allows similar exemption to Philippine Embassy and its personnel on their purchase of goods and services in your country. HDAECI Hence, the local purchase of one (1) unit of 2005 Toyota Camry 2.4E A/T for the official use of the Royal Embassy of Saudi Arabia is exempt from VAT. (BIR Ruling No. ITAD-110-04 dated October 12, 2004) Very truly yours, (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service