BIR Ruling [DA-527-98]

November 25, 1998 BIR RULING [DA-527-98] Embassy of the United States of America Manila Attention: Mr . Joseph McGee Deputy Executive Officer, USAID Gentlemen : This refers to your letter dated October 13, 1998 requesting for exemption from the payment of value-added tax (VAT) and ad valorem tax for the purchase by the Embassy of one (1) unit of motor vehicle. In reply thereto, please be informed that under the principle of reciprocity, this office may grant tax exemption to the Embassy of a foreign state and its personnel on their local purchases of goods and services provided that they can submit to the Commissioner of Internal Revenue or his duly authorized representative a copy of the Special legislation on international agreement showing that said foreign government allows similar tax exemption to the Philippine Embassy or its personnel on their purchase of goods or services in that foreign country. (BIR Ruling No. 206-73 dated May 11, 1993) Thus, upon the certification by the Department of Foreign Affairs that indirect tax (i.e., value-added tax and ad valorem tax) exemption is granted to the Philippine Embassy and its personnel in a particular host country, the same privilege will also be accorded to the latter's Embassy and its personnel in the Philippines. Such being the case, since the Department of Foreign Affairs has recommended a favorable action on the basis of reciprocity to the request for exemption from the payment of the VAT and Ad Valorem Tax on the local purchase by the Embassy of one (1) unit of motor vehicle for its official use, the said sale shall be exempt from VAT and ad valorem tax imposed under Sections 106(A) and 149 of the Tax Code of 1997, respectively. (BIR Ruling No. DA-483-96 dated December 17, 1996) casia Very truly yours, (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner (Legal and Enforcement Group)