Request for Exemption from the Payment of VAT on Local Purchase of Motor Vehicle

October 27, 1992 BIR RULING NO. 333-92 99; 149 246-92 333-92 Embassy of France Salustiana Dee Tower Makati, Metro Manila Gentlemen : This refers to your Note Verbale No. 141/AE dated August 13, 1992 which was referred to this Office by the Department of Foreign Affairs, relative to your request for exemption from the payment of VAT on local purchase of motor vehicle intended for the use of the representative of the Service de Cooperation Technique Internationale de Police. LibLex 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 on 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, with respect to immovable property, subject to the provisions of Article 23. It is clear from the foregoing that the tax exemptions of diplomatic agents/representatives do not include exemption from indirect taxes of a kind which are normally incorporated in their purchases of goods and services, e.g., ad valorem tax and VAT. However, under the principle of reciprocity, this Office may grant tax exemption to the Embassy of France or its personnel on their local purchases of goods and services, 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 Filipino Embassy personnel on their purchase of goods and services in your territory. Per your letter dated October 7, 1992 addressed to the Commissioner and signed by your Deputy Chief of Mission, Joel LOUVET, all diplomatic missions in Paris, which includes the Philippine Embassy, enjoy an exemption from all taxes and duties on cars either imported from foreign countries or acquired in France. The exemption in the latter case includes VAT for which those missions benefit from a special suspension of payment. VAT must however be paid if the car is later sold to a non-privileged person. Such being the case, the Embassy of France is exempt from the ad valorem and value-added taxes on its local purchase of a motor vehicle. LLjur This revokes BIR Ruling No. 246-92 dated September 3, 1992. Very truly yours, VICTOR A. DEOFERIO, JR. Deputy Commissioner (Officer-In-Charge)