Embassy of the State of Palestine

January 12, 2021 DA ITAD BIR RULING NO. 001-21 Principle of Reciprocity; BIR Ruling No. ITAD-002-21 Embassy of the State of Palestine 2nd Floor, 112 LPT Tower Legaspi Village 1229 Makati City Gentlemen : This refers to your Note No. Pal Ph 91/2020 dated December 1, 2020 referred to this Office by the Department of Finance and the Department of Foreign Affairs (DFA), requesting for exemption from payment of value-added tax (VAT) and ad valorem tax on the local purchase of a motor vehicle for the official use of the Embassy of the State of Palestine, specifically described as follows: HTcADC MAKE YEAR COLOR FRAME NUMBER ENGINE NUMBER Toyota Fortuner 2.4L 4x2 V AT 1Q027 2021 Gray Metallic MHFJB8GSXL1582972 2GDC748070 In reply, please be informed that Article 34 of the Vienna Convention on Diplomatic Relations states that the tax exemption privilege of an Embassy and its diplomatic agents does not include exemption from VAT and ad valorem tax, which are indirect taxes, on their local purchase of goods and services, thus: " ARTICLE 34 A diplomatic agent 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 the goods and services; xxx xxx xxx" In other words, purchases by the Embassy or its agents of goods and/or services shall, in general, be subject to the VAT and ad valorem tax under Sections 106 and 149 of the National Internal Revenue Code (NIRC) of 1997, as amended, respectively. However, applying the principle of reciprocity, this Office may confirm VAT and ad valorem tax exemption to the Embassy of the State of Palestine and/or its personnel on their local purchase of motor vehicles since it appears from the DFA VAT matrix dated December 23, 2020 that the Government of the State of Palestine allows similar exemption to the Philippine Embassy and/or its personnel on their purchase of motor vehicles in Palestine. In view thereof, the local sale of one (1) unit of 2021 Toyota Fortuner, for the official use of the Embassy of the State of Palestine, being an exempt entity, shall be subject to VAT at zero-percent (0%) rate pursuant to Section 106 (A) (2) (b) of the NIRC of 1997, as amended. Such sale is likewise exempt from ad valorem tax pursuant to Section 9 of Revenue Regulations No. 25-2003. This ruling is issued on the basis of the facts as represented. However, if upon investigation it shall be disclosed that the actual facts are different, then this ruling shall be without force and effect insofar as the herein parties are concerned. Very truly yours, Commissioner of Internal Revenue By: (SGD.) LARRY M. BARCELO OIC-Assistant Commissioner Legal Service