Tax Exemption of Diplomatic Agents

September 9, 1992 BIR RULING NO. 260-92 196 095-89 260-92 Embassy of the Islamic Republic of Iran Manila Gentlemen : This refers to your letter dated July 23, 1992, which was referred to this Office by the Assistant Secretary, Office of Legal Affairs, Department of Foreign Affairs, relative to your purchase of a real property in the Philippines for the official use of that mission. It appears that you have already paid under protest the amount of P740,586.00 as documentary stamps, transfer taxes and registration fee in connection with the said purchase or real property which amount you intend to request a refund after securing an exemption from this Office. In connection therewith, please be informed that pursuant to Section 34 of the Vienna Convention on Diplomatic Relations adopted at Vienna on April 18, 1961, diplomatic agents are 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 and 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 undertakings in the receiving State; e. charges levied for specific services rendered; and f. registration, court or record fees, mortgage dues and stamp duty, with respect to immovable property, subject to the provisions of Article 23. Moreover, Article 23 of said Convention provides: "1. The sending State and the Head of the mission shall be exempt from all national, regional or municipal dues and "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 foregoing that the documentary stamp tax on the sale of the real property to the Embassy does not fall within the purview of anyone of the aforesaid exceptions. Accordingly, that Embassy is exempt from the payment of the documentary stamp tax imposed by Section 196 of the Tax Code on its purchase of real property. However, under Section 173, also of the Tax Code, 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. Accordingly, the seller of the real property which that Embassy purchased shall be the party directly liable for the payment of the documentary stamp tax due thereon. As regards your exemption from the local transfer taxes and registration fee relevant to the said purchase, it is suggested that your request be directed to the local government concerned and to the Office of the Register of Deeds which has jurisdiction over the same. cdtech Very truly yours, JOSE U. ONG Commissioner of Internal Revenue