BIR Ruling [DA-286-99]

May 13, 1999 BIR RULING [DA-286-99] Royal Danish Embassy 6th Floor, Salustiana Dy Tower 104 Paseo de Roxas, Makati City Attention: Ms . Shirley S . Sanares Administrative Officer Gentlemen : This refers to your letter dated May 28, 1997 requesting for exemption from payment of Value Added Tax (VAT) on the local purchases of goods and services by the Royal Danish Embassy. It appears that the Royal Danish Embassy is one of the Embassies included in the List of Embassies exempted from the payment of Value Added Tax and other similar taxes imposed on local purchases of goods and services certified by the Office of the Protocol, Department of Foreign Affairs in compliance with the reciprocal treatment to which the Philippine Government is committed in accordance with the international comity. 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 the 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 hereby grants tax exemption from value added and ad valorem taxes to the Royal Danish Embassy or its personnel on their local purchases of goods/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) Very truly yours, Commissioner of Internal Revenue By: (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner Legal and Enforcement Group