Tax Exemption of Diplomatic Representatives Does Not Include Exemption from Excise Taxes

June 10, 1987 BIR RULING NO. 161-87 171 117-81 161-87 Gentlemen : This refers to your letter dated January 12, 1987 requesting a ruling as to the consequence of the tax exemption issued by the U.S. Embassy in the Philippines covering percentage taxes on room accommodation, food and beverage (soft/hard drinks) to a 26-member delegation headed by U.S. Congressman Don L. Banker during their official visit here from January 11 to 13, 1987. You also requested that the ruling be made applicable to all embassies in Manila. In reply, please be informed that 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 : a) indirect taxes of a kind which are normally incorporated in the price of goods or services, b) dues and taxes on private immovable property situated in the territory of the receiving State, unless he holds it on behalf of the sending State for the purposes of the mission; c) estate, succession or inheritance duties levied by the receiving State, subject to the provisions of paragraph 4 of Article 39; d) dues and taxes on private income having its source in the receiving State and capital taxes on investments made in commercial undertaking in the receiving State, e) charges levied for specific services rendered, f) registration, court or record fees, mortgage dues and stamp duty, with respect to immovable property, subject to the provisions of Article 23. It is clear from the foregoing that the tax exemption of diplomatic representatives does not include exemption from the excise taxes such as the 12% hotel room occupancy tax, the 4% tax on food as well as the 8% tax on distilled spirits, fermented liquors and wines imposed by Sections 171 and 172(1) & (2) of the Tax Code, as amended, falling under paragraph (a) above. Accordingly, no exemption from said taxes can be extended to the diplomatic representatives of the U.S. Embassy, including those headed by Congressman Banker. iatdc This invariably applies to all diplomatic representatives of other embassies of foreign countries maintained in this country. It may be stated in this connection that the 12% hotel room occupancy tax, the 4% tax on food as well as the 8% tax on distilled spirits, fermented liquors and wines are imposed on and directly payable by the proprietors, operators or keepers of hotels, motels, resthouses, pension houses, lodging houses, resorts, restaurants, refreshment parlors and other eating places. The fact that said taxes may ultimately be shifted to or passed on to the embassy will not constitute the same as a tax payable by said embassy for purposes of exemption. (BIR Ruling No. 026-79) Very truly yours, (SGD.) BIENVENIDO A. TAN, JR. Commissioner