BIR Ruling [DA-053-99]

February 3, 1999 BIR RULING [DA-053-99] Bolinao Security & Investigation Service, Inc. 1161 Manuel Dela Fuente Sampaloc MANILA Attention: Mr . U Caasi, Jr . President Gentlemen : This refers to your letter requesting for a ruling as to whether or not the sale of services by Bolinao Security & Investigation Service, Inc. to the United States Embassy is effectively zero-rated pursuant to Section 108(B)(3) of the Tax Code of 1997. In reply, please be informed that pursuant to Article 34 Vienna Convention on Diplomatic Relations, pertinent portions of which read: "ARTICLE 343 "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 the goods and services xxx xxx xxx" the 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, sale of goods and services to the Embassy shall be subject to the value-added tax prescribed under Sections 106(A) and 108(A) both of the Tax Code of 1997. However, under the principle of reciprocity, this Office may grant exemption to the Embassy of United States or its diplomatic personnel on their local purchases of goods and/or services provided that they can submit to the Commissioner of Internal Revenue or his duly authorized representative a copy of special legislation or international agreement that the Government of the United States of America grants similar exemption to the Philippine Embassy or its personnel on their local purchases of goods and services in that territory. (BIR Ruling No. 206-93 dated May 11, 1993) It appears that the Government of the United States of America allows similar exemption to the Philippine Embassy or its diplomatic personnel on their purchases of goods and services in the U.S. Such being the case, the sale of services by Bolinao Security & Investigation Service, Inc. to the United States Embassy is not effectively zero-rated by only exempt from value-added tax. This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be disclosed that the facts are different, then this ruling shall be considered null and void. LexLib Very truly yours, Commissioner of Internal Revenue By: (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner (Legal & Enforcement Group)