Reciprocal Exemption Granted on the Articles Sold by Local Manufacturers and Producers to the Japanese Embassy

February 10, 1958 BIR RULING NO. 078-58 The Honorable The Secretary of Foreign Service (Thru the Honorable The Secretary of Finance) Manila S i r : In answer to your letter dated January 10, 1958, I have the honor to inform you as follows: cdti Under existing internal revenue laws, the so-called commodity tax is unknown in the Philippines. However, on articles locally manufactured or produced, as well as those imported from abroad, either the specific, sales, compensating, or advance sales tax is imposed, depending upon the nature and destination thereof. The specific tax is imposed on locally produced or manufactured, or imported articles classified under Title IV of the National Internal Revenue Code; the sales tax on articles classified under Title V of the same Code, which are locally produced or manufactured for sale; the compensating tax on imported articles destined for personal use of the importer; and the advance sales tax on articles imported for the purpose or resale. Pursuant to previous rulings of this Office, articles subject to the specific tax may, on the basis of reciprocity, be purchased locally or imported by foreign diplomatic missions and its officials tax-free. Likewise , articles for the use of said agencies and persons maybe imported without the payment of the compensating tax. On the other hand, locally produced or manufactured articles are ordinarily subject to the sales tax even if sold to said agencies and persons because the sales tax is the direct and personal liability of the manufacturer or producer of the articles sold. However, on the basis of reciprocity, sales by local manufacturers or producers to foreign legations may be exempted from the sales tax. Accordingly, since the Japanese Government is amenable to a reciprocal exemption, sales by local manufacturers and producers to the Japanese Embassy and its officials may be exempted from the sales tax. cdll Very truly yours, (SGD.) JOSE ARAAS Commissioner of Internal Revenue