Australian Embassy is Exempt from Capital Gains Tax and Documentary Stamp Tax on the sale of Its Property

June 25, 1991 BIR RULING NO. 120-91 196 144-84 120-91 Gentlemen : This refers to your letter dated June 11, 1991 requesting a ruling as to whether the Australian embassy is exempt from both capital gains and documentary stamp taxes on the sale of its property at Magallanes Village, Makati, Metro Manila. cdti It appears that as the seller of real property, the embassy will be responsible for capital gains and documentary stamp taxes. Moreover it is verbally represented that the property in question is the present site of the Australian Embassy; and that the sale is for the purpose of acquiring another embassy site. In reply, please be informed that the Article 23 of the Vienna Convention on Diplomatic Relations adopted on April 18, 1961 (Vol. IV, P. 445-460, Phil. Tax Treaty Series) states: "Article 23 "1. The sending state and the head of mission shall be exempt from all national, regional or municipal dues and taxes in respect of the premises of the mission, whether owned or leased, other than such as represent payment for specific services rendered. "2. The exemption from taxation referred to in this article shall not apply to such dues and taxes payable under the law of the receiving state by persons contracting with the sending state or the head of the mission." It is clear from the aforequoted provisions of the Convention that the Australian Embassy is exempt from the capital gains tax on the sale of its property at Magallanes Village. On the other hand, considering that the documentary stamp tax is payable by either party to the contract; that under the convention (Arts. 23), the Australian Embassy is exempt from all internal revenue taxes for which it is directly liable; and that the documentary stamp tax on such conveyance of property has become the direct liability of the Embassy by virtue of the agreement between the parties thereto, the Embassy shall, likewise, be exempt from the documentary stamp tax due on the adverted sale. However, it is provided that whenever one party to the taxable document enjoys exemption from the tax herein imposed, the other party thereto who is not exempt shall be the one directly liable for the tax. (Sec. 173, Tax Code as amended) Accordingly, the buyer of the Australian embassy real property shall be the party directly liable for the payment of the documentary stamp tax due thereon. cdtech Very truly yours, (SGD.) JOSE U. ONG Commissioner