BIR Ruling [DA-291-98]

July 1, 1998 BIR RULING [DA-291-98] Canadian Int'l. Dev't. Agency (CIDA) Canadian Embassy Manila Gentlemen : This refers to your letter dated March 13, 1998 requesting for exemption from the payment of value-added tax on the local purchase by the Canadian International Development Agency for two (2) units of motor vehicles, namely: (1) 1997 Mitsubishi Space Wagon 4G93A-C4927 (2) 1997 Mitsubishi L-300 EXCEED 4G63-UJ2106 JMYSNPO3WVA000897 that said intended purchase of vehicles is for the official use of the Philippine-Canada Cooperation Office; and that the Department of Foreign Affairs approved said request and in fact issued an authorization dated July 28, 1997 for the said local purchase with the necessary exemptions. llcd In reply, please be informed that there is no law or regulations in the Philippines expressly granting exemption from the value-added tax to foreign embassies, their missions and diplomatic staff on their local purchase of goods/services. Our stand is based on Article 34(e) of the Vienna Convention on Diplomatic Relations adopted on April 18, 1961 which provides that the tax exemptions of diplomatic agents/representatives do not include exemption from indirect taxes of a kind which are normally incorporated in their purchases of goods and services, e.g. ad valorem tax and VAT. However, under the principle of reciprocity this Office grants exemption from VAT to foreign embassies including their missions and diplomatic staff members provided that it can submit to the Commissioner of Internal Revenue or her duly authorized representative a copy of the special legislation or international agreement showing that its government allows similar tax exemption privileges to the Philippine Embassy personnel on their local purchase of goods/service in that territory. Such being the case, since the Philippine Embassy and its diplomatic missions in Canada are granted exemption from VAT the same VAT exemption privilege is granted to the CIDA on their local purchase of the foregoing vehicles in the amounts of P64,545.45 for the 1997 Mitsubishi Space Wagon and P55,000.00 for the 1997 Mitsubishi L-300 EXCEED from Citimotors, Inc. with business address at corner Pasong Tamo and Don Bosco Streets, Makati City. It is understood that this exemption will not entitle the supplier to any input tax, credit corresponding to the above-stated sale. (SN TEC SN 0001-94 dated February 3, 1994 and DA-246-97 dated July 22, 1997) Very truly yours, (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner Legal & Enforcement Group