Diplomatic Agents/Representatives are Subject to the Payment of Percentage Tax Shifted to Them by the Proprietors, Operators or Keepers of Hotels

October 1, 1991 BIR RULING NO. 202-91 113 366-88 202-91 Gentlemen : This refers to your letter dated August 5, 1991 stating that in general hotels and other tourism related organizations provide you with quotations of their applicable rooms rates, subject to or inclusive of 13-14% government tax; and that for official visits where reservations are made directly through the Embassy, you issue Certificates of Tax Exemption to the hotel concerned and they bill you net of tax. In connection therewith, you are requesting certification to the effect that you are immune from paying the percentage tax so that you only have to submit a copy of the certification to the hotels involved for you to be billed net of tax. In reply, I have the honor to inform you 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 purpose 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 undertakings in the receiving state; (e) charges levied for specific services rendered; (f) registration, court, or record fees, mortgage dues and stamp duty which respect to immovable property, subject to the provisions of Article 23. It is clear from the foregoing, that the tax exemption of diplomatic agents/representatives do not include exemption from the indirect taxes such as percentage taxes, falling under paragraph (a) above. Such being the case, diplomatic agents/representatives are subject to the payment of the percentage tax which may be shifted to them by the proprietors, operators or keepers of hotels under Section 113 of the Tax Code, as amended. cdt Very truly yours, (SGD.) EUFRACIO D. SANTOS Deputy Commissioner and Officer-in-Charge