BIR Ruling [UN-046-94]

February 8, 1994 BIR RULING [UN-046-94] Embassy of Malaysia 107 Tordesillas Street Salcedo Village, Makati Metro Manila Attention: Mr . Austin Oliver Third Secretary (Administration) Gentlemen : This refers to your letter dated January 18, 1994, relative to your request for exemption from the payment of taxes on your purchase of one (1) unit of Honda car from Honda Cars Philippines, Inc. 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; cd 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 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; 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 Malaysia 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 or its personnel on their purchase of goods and services in your territory. Per the list submitted by the Office of Protocol, Department of Foreign Affairs, Manila, the Embassy of Malaysia is one of the embassies exempted from value-added and other local taxes imposed on local purchases of goods and services. Such being the case, the Embassy of Malaysia is exempt from the ad valorem and value-added taxes on its local purchase of a motor vehicle. (BIR Ruling No. 318-93 dated July 8, 1993). Very truly yours, JAIME M. MAZA Assistant Commissioner (Legal Service)