BIR Ruling [DA-129-97]

March 25, 1997 BIR RULING [DA-129-97] Embassy of the Republic of Cuba Makati City Gentlemen : This refers to your letter dated January 30, 1997 which was referred to this office by the Department of Foreign Affairs, requesting for issuance of a Certificate of Exemption from the payment of taxes such as capital gains tax and documentary stamp tax relative to the sale of the real estate property of the Embassy being used as residence of the Ambassador located at 120 Cambridge Circle, Forbes Park, Makati City to Messrs. Simeon Tiu and Samuel Tiu. cdta In reply, please be informed that pursuant to Article 23 of the Vienna Convention on Diplomatic Relations adopted on April 18, 1961 (Vol. IV, p. 445-460, Phil. Tax Treaty Series) pertinent portions of which read: "Article 23 "1. The sending State and the head of mission shall be exempt from all national, regional or municipal dues and taxes in respect of the premises of the mission, whether owned or leased, other than such as represent payment for specific services rendered. "2. The exemption from taxation referred to in this Article shall not apply to such dues and taxes payable under the law of the receiving State by persons contracting with the sending State or the head of the mission." the Embassy of the Republic of Cuba is exempt from the capital gains tax on the sale of its real property located in Forbes Park, Makati City, and from the documentary stamp tax imposed under Section 196 of the Tax Code, as amended. However, Sec. 173 of the Tax Code, as amended, provides, among others, that whenever one party to the taxable document enjoys exemption from the tax therein imposed, the other party thereto who is not exempt shall be the one directly liable to the tax. In view thereof, and considering that the Embassy is tax exempt, the other party to the transaction, i. e., the buyers of the real property, Messrs. Simeon Tiu and Samuel Tiu, shall be the party directly liable for the payment of the said tax pursuant to Section 173 of the Tax Code, as amended by R.A. 7660. (BIR Ruling No. 120-91 dated June 25, 1991) cdti Very truly yours, ALICIA P. CLEMENO Assistant Commissioner (Legal Service) By: ALICIA L. TOMACRUZ Head Revenue Executive Assistant (Legal Service)