BIR Ruling [UN-023-96]

January 17, 1996 BIR RULING [UN-023-96] Embassy of Turkey 2268 Paraiso Street Dasmarias Village Makati City Attention: Ms . Minerva Jean A . Falcon Ambassador Gentlemen : This refers to your faxed letters dated October 20, 1995 and November 24, 1995, requesting information regarding the exemption from VAT of that embassy including its missions and diplomatic staff members on your local purchase of goods and services. You stated that VAT is imposed in Turkey up to a maximum of 23%; that to enable diplomatic missions in Turkey to avail of exemption from VAT; the Turkish Ministry of Foreign Affairs issues VAT exemption cards to missions and diplomatic staff members which are presented to establishments or creditors in order to claim exemption; and that the pertinent regulation on the matter is the "Guide to Diplomatic Missions in Turkey-Exemption from Value-Added Tax." In connection therewith, you are requesting information as to whether there is also an existing regulation in the Philippines which provides for exemption from VAT to foreign embassies on their purchase of goods/services or upon completion of certain procedures. In reply, please be informed that there is no law or regulation in the Philippines expressly granting exemption from the value-added tax to foreign embassies on their local purchase of goods/services. Our stand is based on Article 34(e) of the Vienna Convention on Diplomatic Relations adopted on April 18, 1961 which provides 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 grants exemption from VAT to foreign embassies including their missions and diplomatic staff members provided that it can submit to the Commissioner of Internal Revenue or her duly authorized representative a copy of the special legislation or international agreement showing that its government allows similar tax exemption privileges to the Philippine Embassy personnel on their local purchase of goods/services in that territory. Such being the case, since the Philippine Embassy and its diplomatic missions in Turkey are granted exemption from VAT, the same VAT exemption privilege is granted to the Embassy of Turkey including its missions and diplomatic staff members on their local purchase of goods/services. cdtech Very truly yours, ALICIA P. CLEMENO Assistant Commissioner (Legal Service) By: ALICIA L. TOMACRUZ Head Revenue Executive Assistant (Legal Service)