BIR Ruling [DA-125-99]

March 3, 1999 BIR RULING [DA-125-99] The Embassy of the Federal Republic of Germany Manila Gentlemen : This refers to your Note Verbale No. 169/98 dated May 22, 1998 addressed to the Department of Foreign Affairs, Pasay City, and was referred to this Office on June 15, 1998, requesting for exemption from the payment of ad valorem and value-added taxes on your local purchases of goods and services. prcd In reply, please be informed that pursuant to Article 34 of the Vienna Convention on Diplomatic Relations, pertinent portion of which 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 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, purchases by that Embassy of goods and/or services 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 from value added and ad valorem taxes to the Embassy of the Federal Republic of Germany or its personnel on their local purchases of goods and/or services, it appearing from the list submitted to this Office by the Department of Foreign Affairs that your government allows similar tax exemption to the Philippine Embassy and its personnel on their purchases of goods and services in your territory. (VAT Ruling No. 14-97 dated February 5, 1997) cdpr Very truly yours, (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner (Legal and Enforcement Group)