BIR Ruling [DA-435-98]

September 24, 1998 BIR RULING [DA-435-98] Embassy of the Argentine Republic 6th Floor ACT Tower 135 Senator Gil J. Puyat Avenue Makati City Attention: Mr . Alberto Daniel Kan Counsellor Gentlemen : This refers to your letter dated June 1, 1998 requesting for exemption from the payment of donor's tax on the donation of a motor vehicle owned by the Embassy of the Argentine Republic in favor of the Local Superior of the Sons of Divine Providence (Don Orione), Inc. cdta It appears that the subject motor vehicle is a used 1991 Mitsubishi Gallant Super Saloon 4-door sedan bearing License Plate No. M CM 1000, Motor No. 4G63 KT2809 with Serial/Chassis No. DSNE33AMZ00401, and with engine capacity of 2,000cc 4-cylinders; that the said vehicle is part of the property inventory of the embassy; that, obviously, it was brought to the Philippines as a tax-free article under and by virtue of the embassy's diplomatic status; and that said vehicle shall be donated by the embassy by way of assistance to the religious works of the above-mentioned parish. In reply, please be informed that Article 34 of the Vienna Convention on Diplomatic Relations provides that a diplomatic agent shall be exempt from all dues and taxes, personal or real, national, regional or municipal . . . . It is clear from the above-cited provision that an Embassy and its diplomatic agents are exempt from direct taxes, e.g., donor's tax. Such being the case, the Embassy of Argentine Republic is exempt from the payment of donor's tax on the donation made in favor of the Local Superior of the Sons of Divine Providence (Don Orione), Inc. However, since said vehicle has an engine capacity of 2,000cc, it is well within the class of imported vehicles which are subject to excise tax based on the criteria prescribed under Department of Finance Circular No. 34-93, implementing Executive Order No. 90. (see BIR Ruling No. 377-93) Moreover, as a recipient of a tax exempt vehicle which is not enjoying indirect tax exemption, the parish is liable to the 10% value-added tax as if it is the importer thereof, pursuant to Section 107(B) of the Tax Code of 1997. The 10% VAT shall be computed on the basis of the depreciated value of the vehicle provided it is not lower than 50% of the invoice value thereof in the Country of Origin. (BIR Ruling No. 127-94 dated August 22, 1994) 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. casia Very truly yours, Commissioner of Internal Revenue By: (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner (Legal & Enforcement Group)