International Rice Research Institute

December 23, 2009 BIR RULING [DA-(VAT-118) 825-09] PD 1620; RA 2707; 109 (K); VAT Ruling Nos. 006-93; 077-88; 039-99 International Rice Research Institute Suite 1009, Security Bank Center 6776 Ayala Avenue 1226 Makati City Attention: Mr. Norman A. Macdonald Treasurer and Director for Management Services Gentlemen : This refers to your letter dated November 12, 2009 which was indorsed to this Office by the Department of Finance on December 7, 2009, requesting for VAT exemption on your local purchase of ten (10) units 2010 Toyota Corolla Altis, three (3) units Toyota Hi-lux, four (4) Toyota Innova and one (1) Hyundai County Bus, pursuant to Presidential Decree (PD) No. 1620, Republic Act (RA) No. 2707 and the Headquarters Agreement between the Republic of the Philippines and International Rice Research Institute ("IRRI"). THaCAI In reply, please be informed that IRRI has been granted tax exemption privileges under both Republic Act 2707 otherwise known as "An Act to Exempt the International Rice Research Institute or its Successors from the Payment of Gift, Franchise, Specific, Percentage, Real Property Exchange, Import, Export and All Other Taxes, and the Members of its Scientific and Technical Staff from the Payment of Income Tax" and Presidential Decree No. 1620 and the status of an international organization under said P.D. 1620. (BIR Ruling No. 077-88). Under the statutes cited above, IRRI enjoys comprehensive tax exemption privilege which "extends to goods imported and owned by the International Rice Research Institute . . ." This exemption was granted in the light of the commitment of the Philippine Government to extend full support to IRRI. In the context of this commitment, the broad tax exemption privileges granted under R.A. No. 2707 and PD No. 1620 shall not be construed as being limited only to the taxes for which the IRRI is directly liable. (VAT Ruling No. 006-93). Furthermore, Section 106 (A) (2) (c) of the Tax Code of 1997, as amended by R.A. No. 9337 provides, to wit: "SECTION 106. Value-Added Tax on Sale of Goods or Properties. xxx xxx xxx (A) Rate and Base of Tax. There shall be levied, assessed and collected on every sale, barter or exchange of goods or properties, value-added tax equivalent to ten percent (10%) of the gross selling price or gross value in money of the goods or properties sold, bartered or exchanged, such tax to be paid by the seller or transferor. xxx xxx xxx (2) The following sales by VAT-registered persons shall be subject to zero percent (0%) rate: xxx xxx xxx (c) Sales to persons or entities whose exemption under special laws or international agreements to which the Philippines is a signatory effectively subjects such sales to zero rate." Hence, sales of goods to IRRI, such as the automobiles above-described, shall be subject to VAT at zero percent (0%) rate pursuant to Section 106 (A) (2) (a) (5) of the Tax Code of 1997, as amended by R.A. 9337. DcaSIH With the favorable endorsement of the Department of Foreign Affairs for the tax-exempt purchase of automobiles by IRRI, this Office grants your request for VAT zero rating of the purchase of ten (10) units 2010 Toyota Corolla Altis, three (3) units Toyota Hi-lux, four (4) Toyota Innova and one (1) Hyundai County Bus. 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.) JAMES H. ROLDAN Assistant Commissioner Legal Service