BIR Ruling [DA-643-99]

November 17, 1999 BIR RULING [DA-643-99] Sycip Salazar Hernandez & Gatmaitan Sycip Law-All Asia Capital Center 105 Paseo de Roxas Makati City Attention: Attys . Ernesto Taio, Jr . and Cecile M . E . Caro Gentlemen : This refers to your letter dated August 4, 1998 requesting on behalf of your client, Justice Florentino P. Feliciano, for a ruling as to whether or not the sale of goods and services as well as the lease of residential condominium unit to the personnel of the United States Embassy is exempt from value-added tax. 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: "(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 the United States Embassy of goods and services shall be subject to value-added tax prescribed under Sections 106(A) and 108(A), both of the Tax Code of 1997. However, 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 or an international agreement showing that said foreign government allows similar tax exemption to the Philippine Embassy or its personnel on their purchases of goods or services in that foreign country. Such being the case, and inasmuch as the United States Government allows such tax exemption privileges to the Philippine Embassy or its personnel on their purchases of goods and services in their territory, this Office, under the principle of reciprocity, hereby grants similar tax exemption to the United States Embassy and its missions an diplomatic staff on their purchases of goods and/or rental services in the Philippines (VAT Ruling No. 009-97 dated January 17, 1997) 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 and Enforcement Group)