BIR Ruling [DA-123-00]

February 24, 2000 BIR RULING [DA-123-00] Ford Edsa 29 Edsa, Greenhills San Juan, Metro Manila Attention: Ms . Loreta C . Sumalde Accountant Ford Edsa, Inc. Gentlemen : This refers to your letter dated March 26, 1999 requesting for exemption from the payment of value-added tax (VAT) for the sale of motor vehicle to the Embassy of the United States of America and extended agency like International Broadcasting Bureau. In reply, please be informed that sale of motor vehicle to the Embassy of the United States of America and extended agency like International Broadcasting Bureau do not fall under any of those transactions which are exempt from VAT under Section 109 of the Tax Code of 1997 and under Article 34 of the Vienna Convention of 1961 on Diplomatic Relations, which exempts from all dues and taxes, personal or real, national, regional or municipal, except indirect taxes of a kind which is normally incorporated in the price of goods or services, e. g. ad valorem and VAT. However, under the principle of reciprocity, such sale of motor vehicle to the Embassy of the United States of America may be treated as exempt, provided that the embassies of foreign state or the members of diplomatic mission purchasing the said products can submit to the Commissioner of Internal Revenue or his duly authorized representative, a copy of the special legislation or international agreement showing that the said foreign government grants similar tax exemption to the Philippine Embassy or its personnel on their purchase of goods and services in that foreign country. This is pursuant to the declared principle of the state that it adopts the generally accepted principle of international law of the land. (VAT Ruling No. 042-98 dated November 26, 1998) Thus, upon the certification by the foreign state that indirect tax (e.g. VAT and ad valorem) exemption is granted to the Philippine Embassy and its personnel in its territory, the same privilege will also be accorded to the latter's Embassy and its personnel in the Philippines. Accordingly, the sale of motor vehicle to the Embassy of the United States of America and extended agency like International Broadcasting Bureau should be treated as VAT exempt. This privilege, however, may only be exercised upon presentation by the concerned Embassy of the written approval of this Bureau. 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. HTCaAD Very truly yours, Commissioner of Internal Revenue By: (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner (Legal & Enforcement Group)