BIR Ruling [UN-022-96]

January 17, 1996 BIR RULING [UN-022-96] Italian Embassy Zeta II Building Makati City Gentlemen : This refers to your Note No. 01283 dated September 26, 1995 which was referred to this Office by the Department of Finance relative to your request for tax exemption for the purchase of two (2) units Tamaraw FX from "Toyota Motor Philippines Corporation. 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 fee and VAT. However, under the principle of reciprocity, this Office may grant tax exemption to the Italian Embassy 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 (BIR Ruling No. 206-93 dated May 11, 1993). Per information relayed to this Office by the Department of Foreign Affairs, the Italian Embassy is one of the embassies exempted from ad-valorem and value added taxes on its local purchase of goods and services. Such being the case, the Italian Embassy is exempt from value added tax on its local purchase of two (2) units of Toyota Tamaraw FX. aisadc Very truly yours, ALICIA P. CLEMENO Assistant Commissioner (Legal Service) By: ALICIA L. TOMACRUZ Head Revenue Executive Assistant (Legal Service)