Request for Exemption from Sales Tax or Contractor's Tax for Purchases or Services Paid for with Funds of UNHCR

April 19, 1985 BIR RULING NO. 058-85 202-00 000-00 058-85 Gentlemen : This refers to your letter dated March 6, 1985 requesting exemption from sales tax on purchases of goods and supplies; and from the contractor's tax on contracts for services paid for with funds of the United Nations High Commissioner for Refugees (UNHCR) in connection with the operation of the Philippine Refugee Processing Centre in Morong, Bataan, the Philippine Refugee Transit Centre in Pasay City, Metro Manila, and the Philippine First Asylum Camp in Puerto Princesa, Palawan. In reply, I regret to inform you that your request cannot be granted for lack of legal basis. Under Section 7, Article II of the Convention on the Privileges and Immunities of the United Nations which became effective with respect to the Philippines on October 28, 1947, reading: "Section 7. The United Nations, its assets, income and other property shall be: "(a) Exempt from all direct taxes ; it is understood however, that the United Nations will not claim exemption from taxes which are, in fact, no more than charges for public utility services; "(b) Exempt from customs duties and prohibitions and restrictions on imports and exports in respect of articles imported or exported by the United Nations for its official use. It is understood, however, that article imported under such exemption shall not be sold in the country into which they are imported except under conditions agreed with the Government of the country; "(c) Exempt from customs duties and prohibitions and restrictions on imports and exports in respect of its publications." (Emphasis supplied) the UNHCR is exempt from all taxes for which it is directly liable . Consequently, it cannot claim exemption from the sales tax or contractor's tax for the reason that these taxes are directly payable by the manufacturer or producer, in the case of the sales tax; and by the contractor, in the case of the contractor's tax. The fact that the sales tax or contractor's tax may ultimately be shifted to or passed on to UNHCR as the purchaser or contractee, as the case may be, will not convert the same as taxes on UNHCR, for purposes of the exemption. (see Philippines Acetylene Co., Inc. vs. Commissioner of Internal Revenue, et. al., G.R. No. L-19707, August 17, 1969) cdt Very truly yours, (SGD.) TOMAS C. TOLEDO Acting Commissioner