BIR Ruling [DA-563-99]

September 29, 1999 BIR RULING [DA-563-99] Embassy of the Republic of Korea 4th Floor Pacific Star Building Sen. Gil Puyat corner Makati Avenues 1226 Makati City Attention: Ms . Clarinna A . Cabayan Administrative Officer Gentlemen : This refers to your letter dated June 25, 1999 requesting for exemption from the payment of donor's tax on the donation of a motor vehicle owned by the Embassy of the Republic of Korea in favor of the Jimenez Christian Learning Center, Inc. It appears that the subject motor vehicle is a used 1994 Hyundai Sonata bearing License Plate No. DC 2457, Motor/Engine No. G4CPP141079 with Chassis No. KMHCF31FPRU068532, 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 above-mentioned educational institution. 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 the Republic of Korea is exempt from the payment of donor's tax on the donation made in favor of the Jimenez Christian Learning Center, 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 donee 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. Very truly yours, Commissioner of Internal Revenue By: (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner (Legal & Enforcement Group)