Exemption from Internal Revenue Taxes (VAT and Excise Tax)

May 15, 1990 BIR RULING NO. 083-90 100 (a) (2) 149 1990 083-90 Gentlemen : This refers to Department Order No. 43-89 issued by the Department of Finance on October 13, 1989 authorizing staff members in the professional or higher level of the Asian Development Bank (ADB) to acquire a second car from local sources participating in the Car Manufacturing Program under the following terms and conditions: cdt 1. That the second car shall be locally assembled and drawn from those covered by the Car Development Program; 2. That the purchaser shall be entitled to the right of rebate of taxes as if said locally assembled cars were exported; 3. That the exemption shall be extended only to staff members in the professional or higher level; and 4. That the payment shall be made in foreign currency acceptable as part of the international reserves of the Philippines. The unsettled issue is whether the Authorized/Qualified Asian Development Bank Personnel; rather than the Bank itself as an institution, are entitled to purchase a second car from local sources free from internal revenue taxes such as VAT and excise tax. In asserting the view that they are entitled to the privilege, ADB argued that Department of Finance Order No. 43-89 dated October 13, 1989 as communicated to ADB by the Office of protocol of the Department of Foreign Affairs in a Note Verbale No. 32859 dated November 7, 1989 should be considered as a supplement to RP-ADB Agreement which entered into force on July 28, 1967. The binding force of international agreement is consent (Fenwicks International Law, p. 35) Department of Finance Order No. 43-89 as endorsed by the Office of Protocol, Department of Foreign Affairs, is evidence of Philippine consent to consider current local purchase of second car by authorized ADB personnel as an export sale; hence, exempt from internal revenue taxes such as VAT and excise tax subject to certain conditions therein prescribed. To take advantage of the VAT exemption, the authorized ADB personnel claiming the exemption shall first secure a tax exemption certificate from the BIR pursuant to Revenue Regulations No. 10-89. On the other hand, to avail of the excise tax exemption, the authorized ADB personnel claiming the same shall in addition to a tax exemption certificate, accomplish a purchase order and take delivery of the car before removal of the same from the manufacturer's premises. In both cases, the substantive and procedural requirements indicated under Department of Finance Order No. 43-89 shall be strictly complied with. Very truly yours, (SGD.) JOSE U. ONG Commissioner