BIR Ruling [DA-173-00]

March 24, 2000 BIR RULING [DA-173-00] 109 (q) VAT Ruling No. 009-97 Computer Network Systems Corporation 401 Centerpoint Building Garment Street, Ortigas Center Pasig City Attention: Ms . Beta Balagotgan VP-Comptroller Gentlemen : This refers to your letter dated July 15, 1998 requesting for a ruling as to whether or not your sale of goods and services to the following: 1) United States Embassy; LexLib 2) World Health Organization; and 3) International Development Law Institute are exempt from value-added tax. 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 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 value-added tax (VAT) on its local purchases of goods and services. In other words, purchases by the United States 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 tax exemption to the United States Embassy or its personnel on their 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 the special legislation or an international agreement showing that said foreign government allows similar tax exemption to the Philippine Embassy or its personnel on their purchases of goods or services in that foreign country. Such being the case, and inasmuch as the US Government allows such tax exemption privileges to Philippine Embassy or its personnel on their purchases of goods and services in that territory, this Office, under the principle of reciprocity, hereby grants similar tax exemption to the United States Embassy and its missions and diplomatic staff on their purchases of goods and/or services in the Philippines. Accordingly, your sale of goods and services to the United States Embassy shall be exempt from value-added tax pursuant to Section 109(q) of the Tax Code of 1997. (VAT Ruling No. 009-97 dated January 17, 1997) Moreover, since the Philippines is a member of the United Nations and a signatory to the Convention on the Privileges and Immunities of the Specialized Agencies of the United Nations and its related organizations operating in the Philippines, like the World Health Organization and International Development Law Institute shall likewise be exempt from value-added tax on their purchases of goods and services pursuant to Section 109(q) of the Tax Code of 1997. (VAT Ruling No. 008-98) 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 and Enforcement Group)