Tax Liability of the British Embassy

February 4, 1988 BIR RULING NO. 025-88 99 001-88 025-88 Gentlemen : This refers to your letter dated January 29, 1988 requesting information as to whether the British Embassy is liable to pay the value-added tax on goods as well as on services rendered to that Embassy. cdti In reply, I have the honor to inform you that under Article 34 of the Vienna Convention on Diplomatic Relations adopted on April 18, 1961, diplomatic agents 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 goods or services; (b) dues and taxes on private immovable property situated in the territory of the receiving state, unless he holds it on behalf of the sending state for the purpose of the mission; (c) estate, succession on inheritance duties levied by the receiving State, subject to the provisions of paragraph 4 of Article 39; (d) dues and taxes on private income having its source in the receiving state and capital taxes on investments made in commercial undertakings in the receiving State; (e) charges levied for specific services rendered; (f) registration, court, or record fees, mortgage dues and stamp duty, with respect to immovable property, subject to the provisions of Article 23. It is clear from the foregoing that the tax exemptions of diplomatic agents/representatives do not include exemption from the indirect taxes such as the value-added tax, falling under paragraph (a) above. Such being the case, local purchases by the Embassy even from the duty-free shops are subject to the value-added tax. Likewise, the sale of service to the Embassy is subject to the value-added tax. However, importation of certain articles by the Embassy, or its personnel, in accordance with Article 36(1) of the Vienna Convention reading: "Article 36 "1. The receiving state, shall, in accordance with such laws and regulations as it may adopt, permit entry of and grant exemption from all customs duties, taxes, and related charges other than charges for storage, cartage and similar services, on: "(a) articles for the official use of the mission; "(b) articles for the personal use of a diplomatic agent or members of his family forming part of his household, including articles intended for his establishment. xxx xxx xxx are exempt from the value-added tax. (see also Sec. 103(u), NIRC as amended by E.O. No. 273) cdtech Very truly yours, (SGD.) BIENVENIDO A. TAN, JR. Commissioner