BIR Ruling [UN-019-96]

December 15, 1995 BIR RULING [UN-019-96] Embassy of the United States of America Roxas Boulevard, Manila Gentlemen : This refers to your Note Verbale No. 770 dated September 5, 1995 which was referred to this Office by the Director for Privileges and Immunities, Department of Foreign Affairs, relative to your request for exemption from the value-added tax on the purchase by Mr. John D. Negroponte, Ambassador Extraordinary and Plenipotentiary of that Embassy, of one (1) unit of personal computer from IBM PC Company, and printer from Personal Computer Specialists, Inc. In reply, please be informed that pursuant to 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 : cdtech (a) indirect taxes of a kind which are normally incorporated in the price of goods or services; (b) dues and taxes or 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; and (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 the 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 the United States of America in Manila and its personnel on their local purchases of goods and services, provided that they can submit to the Commissioner of Internal Revenue or her duly authorized representative a copy of the special legislation or international agreement showing that the US Government allows similar tax exemptions to the Philippine Embassy personnel on their purchase of goods and services in that territory. (BIR Ruling No. 206-93 dated May 11, 1993) Per information relayed to this Office by the Department of Foreign Affairs, the United States Embassy is one of the embassies exempted from ad valorem tax and VAT on its local purchase of goods and services. Such being the case, the Embassy of the United States of America is exempt from the value-added tax on its local purchase of the aforesaid one (1) unit of personal computer and printer. cdlex Very truly yours, ALICIA P. CLEMENO Assistant Commissioner (Legal Service)