Hotel Room Billings to Japanese Delegates Exempt from VAT if the Hotel is VAT-Registered; Hotel Rooms Services to APEC Delegates Shall Qualify for Effective Zero-Rating

October 25, 1996 BIR RULING NO. 111-96 102 (a) 000-00 111-96 Embassy of Japan Sen. Gil J. Puyat Avenue Makati City Attention: Mr . Shinichi Yamada General Manager Gentlemen : This refers to your letter to Undersecretary Milwida U. Guevarra, Department of Finance, dated October 9, 1996, which was referred to this Office requesting confirmation of your opinion that BIR VAT Ruling No. 086-89 dated October 9, 1996 stating that in accordance with the principle of reciprocity, local purchases of goods and services made by the Japanese Embassy and its diplomats are exempt from indirect tax, and that if the suppliers of goods and services are VAT-registered, then their sales are effectively zero-rated, is applicable to hotel room billings to the Japanese delegates to the APEC Conference which will be held in Manila in November, 1996. LLphil It appears that in connection with its Statement of Room Rates, the Manila Diamond Hotel requires prior submission of the Japanese Embassy in the Philippines of a certificate of VAT exemption, on the hotel billings to the Japanese delegates to the APEC Conference; otherwise, the 10% VAT shall be added to the room rates billings. In reply, please be informed that according to the letter of the Office of Protocol, Department of Foreign Affairs dated May 15, 1996, the Philippine Embassy and its diplomats enjoy indirect tax exemption similar to VAT in Japan. In view thereof, and subject to the condition that the Japanese delegates will be accorded diplomatic status while in the Philippines, in accordance with the principle of reciprocity, we hereby confirm your opinion that the subject VAT Ruling No. 086-89 is applicable to hotel rooms billings to the Japanese delegates. In other words, hotel room billings to the Japanese delegates shall be exempt from value-added tax (VAT) if the hotel is VAT-registered, the hotel rooms services to the APEC delegates shall qualify for effective zero-rating. casia Very truly yours, LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue