Exemption of Foreign Embassies and Their Employees in the Philippines from the VAT on Their Local Purchases of Goods/Services

October 17, 1995 BIR RULING NO. 160-95 28 (b) (6) 000-00 160-95 Austrian Embassy 4th Floor, Prince Building 117 Rada St., Legaspi Village Makati City, Metro Manila Attention: Dr . Heide Keller Gentlemen : This refers to your letter dated August 10, 1995, requesting information regarding the exemption of foreign embassies and their employees in the Philippines from the value-added tax (VAT) on their local purchases of goods and/or services. In reply, please be informed that pursuant to Article 34 of the Vienna Convention on Diplomatic Relations, pertinent portion of which reads: "ARTICLE 34 "A diplomatic agent shall be exempt from all dues and taxes, personal or real, national, regional or municipal, except: "(a) indirect taxes of a kind which are normally incorporated in the price of the goods and services. "xxx xxx xxx" the tax exemption privilege of an Embassy and its diplomatic agents does not include exemption from the value-added tax (VAT) on its local purchases of goods and services. In other words, purchases by that Embassy of goods and/or services shall be subject to the value-added tax prescribed under Sections 100 (a) and 102 (a), both of the Tax Code, as amended by Executive Order No. 273. However, under the principle of reciprocity, this Office may grant exemption to the Embassy of Austria or its personnel on their local purchases of goods and/or services it appearing from the list submitted to this Office by the Department of Foreign Affairs that your Government allows similar tax exemption to Filipino Embassy personnel on their purchase of goods and services in your territory. cdta Very truly yours, LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue