BIR Ruling [DA-485-99]

August 24, 1999 BIR RULING [DA-485-99] Ford Makati 2287 Pasong Tamo Extension Makati City Attention: Mr . Benjamin D . Domingo Tax Consultant Gentlemen : This refers to your letter dated May 25, 1999 requesting for a ruling as to whether or not the sale of locally assembled motor vehicles to various embassies and diplomatic missions are effectively zero rated for value-added tax purposes. LexLib In reply, please be informed that in BIR Ruling No. 160-95 dated October 17, 1995, this Office ruled: "xxx xxx xxx "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: LexLib "(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 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 Section 100(a) and 102(a), both of the Tax Code, as amended by Executive Order No. 273. LexLib "However, under the principle of reciprocity, this Office may grant exemption to the Embassy of Austria or its personnel on their local purchases of goods and/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 Philippine Embassy personnel on their purchases of goods and services in your territory." Accordingly, your sale of locally assembled motor vehicles to various embassies and diplomatic missions will not qualify for effective zero-rating but shall only be exempt from value-added tax, provided that they are included in the list furnished by the Department of Foreign Affairs as exempted on the basis of reciprocity. prcd Very truly yours, Commissioner of Internal Revenue By: (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner (Legal & Enforcement Group)