Tax Exemption of the Embassy of France's Interest Income on Bank Deposits

September 21, 1994 BIR RULING NO. 144-94 99-00 206-93 144-94 Embassy of France 16th Floor, Pacific Star Bldg. cor. Gil Puyat & Makati Ave. Makati, Metro-Manila Attention: Mr . Patrick Vaillant Consul Gentlemen : This refers to your letter dated July 5, 1994, in effect, requesting for a ruling that your interest income on bank deposits with the Hongkong and Shanghai Banking Corporation Limited (Hongkong Bank Manila Office) is exempt from Philippine income tax; and that your rental payments for the use of an office space, storage telecommunications room, telephone facilities, mailbox and service for airconditioning units, water, CATV, engineering works, visitors parking area and other similar services and electric consumption to Century Properties Management, Inc., are also exempt from the value-added tax (VAT). In reply, please be informed that pursuant to Section 28(b)(8)(A)(i) of the Tax Code, as amended, foreign governments shall be exempt from Philippine income tax on their interest income derived from their deposits in banks in the Philippines. Such being the case, your interest income from your deposits with the Hongkong Bank (Manila Office) is exempt from the 20% final withholding tax. Under Article 34 of the Vienna Convention on Diplomatic Relations adopted on April 18, 1961, diplomatic agents shall be exempt from all dues and taxes, personal or real, national, regional or municipal, except, among others, indirect taxes of a kind which are normally incorporated in the price of goods or services. However, under the international law principle of reciprocity and equality among sovereign states, this Office may grant tax exemption to the Embassy of France or its personnel on their local purchases of goods and selected service, or rental of real properties used as office space and for other official purposes which are presently covered by the VAT pursuant to R.A. No. 7716, as implemented by Revenue Regulations No. 10-94, as amended, provided that you can submit to the Commissioner of Internal Revenue or his duly authorized representative a copy of the special legislation or international agreement showing that your Government allows similar tax exemption to the Philippine Embassy and its personnel on their purchase of goods and services in your territory. With respect, however, to the amounts paid by the Embassy and Consular Offices of the French Government for their messages abroad, the same shall be exempt from the 10% overseas telecommunications tax pursuant to Section 118(b)(ii) of the Tax Code, as amended. Very truly yours, LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue