BIR Ruling [DA-180-04]

April 6, 2004 BIR RULING [DA-180-04] Animal Products Development Center A. Fernando Street, Marulas Valenzuela City Attention: Dr. Jose Q. Molina Director BAI National Project Director Asia-Pacific Meat Project Gentlemen : This refers to your letter dated December 10, 2003 requesting for reconsideration of BIR Ruling No. DA448-03 dated December 5, 2003 where this Office ruled that "SUCH BEING THE CASE, this Office holds that the local purchase by BAI of a motor vehicle and other equipments from VAT-registered entities shall be subject to the 10% VAT." ( BIR Ruling No. 060-00 dated December 18, 2000 ) In your aforesaid letter, you stated that in the preparation for the Asia-Pacific Meat Project an independent project account was set up with Metrobank with the Chief Technical Adviser of the Project from GTZ/CIM and the National Project Coordinator from Animal Products Development Center (APDC) as joint signatories: that all CFC funds are channeled through UNDP directly to this totally independent Project Account and payments to local suppliers or manufacturers are made directly from the project on behalf of Common Fund for Commodities (CFC) without any involvement of the Bureau of Animal Industry (BAI);that the CFC maintains ownership for all items purchased with CFC funds and will decide on future use at the end of the project: that all international purchases are executed by United Nations office for Project Services (UNOPS) representing CFC and supposedly channeled through UNDP, i.e .,free from import and export duties and taxation and that in no circumstances that BAI is in a position to purchase any item for the APMP using CFC Project funds as BAI has no access to these funds at all. In reply thereto, please be informed that Section 109(q) of the Tax Code of 1997 provides that "Sec. 109. Exempt transactions . The following shall be exempt from value-added tax: "xxx xxx xxx "(q) Transactions which are exempt under international agreements to which the Philippines is a signatory or under special laws, except those under Presidential Decree Nos. 66, 529 and 1590." This Office in BIR VAT Ruling No. 035-98 dated November 17, 1998, which is a reiteration of VAT Ruling No. 008-98 dated January 1998, held that "...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 adopted by the General Assembly on 21 November 1947, the United Nations and its related organizations operating in the Philippines shall be exempt from the VAT on their importations an purchases of important movable and immovable properties for official use. Thus, your procurement of five (5) units of Asia Utility Vehicles which you have placed and ordered from Union Motor Corporation and Gencars, Phil.,Inc. is exempt from the payment of VAT." Considering that the UNOPS is a related organization of the United Nations operating within the Philippines, this Office holds that your request for reconsideration is hereby granted. Accordingly, its local purchases of motor vehicles and other equipments from VAT-registered entities are exempt from value-added tax prescribed in Section 109(q) of the Tax Code of 1997. DTAESI Very truly yours, (SGD.) JOSE MARIO C. BUAG Deputy Commissioner Legal & Inspection Group