International Organization for Migration

January 11, 2023 DA ITAD BIR RULING NO. 002-23 Sec. 106 (A) (2) (b), Tax Code of 1997, as amended; Article 3, PH-IOM Cooperation Agreement; BIR Ruling No. ITAD-194-14 International Organization for Migration 25th Floor, Tower 6789 Ayala Avenue 1226 Makati City Attention: AAA __________ Gentlemen : This refers to your Note No. REF.D.01.E.570 dated November 29, 2022 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 International Organization for Migration (IOM), specifically described as follows: Make Year Color Chassis Number Engine Number Toyota Fortuner 2.4 4x2 Dsl A/T 2023 Attitude Black Mica MHFJB8GS4N1589404 2GDD099094 In reply, please be informed that Section 106 (A) (2) (b) of the National Internal Revenue Code (Tax Code) of 1997, as amended by Republic Act No. 10963, otherwise known as the Tax Reform for Acceleration and Inclusion (TRAIN) Act, states, to wit: HTcADC "SEC. 106. Value-Added Tax on Sale of Goods or Properties. (A) Rate and Base of Tax. There shall be levied, assessed and collected on every sale, barter or exchange of goods or properties, a value-added tax equivalent to twelve percent (12%) of the gross selling price or gross value in money of the goods or properties sold, bartered or exchanged, such tax to be paid by the seller or transferor . xxx xxx xxx (2) The following sales by VAT-registered persons shall be subject to zero percent (0%) rate: xxx xxx xxx (b) Sales to persons or entities whose exemption under special laws or international agreements to which the Philippines is a signatory effectively subjects such sales to zero rate." Generally, every sale of goods or properties by VAT-registered persons is subject to VAT at 12%. However, if such sale is made to persons or entities that are exempt from VAT, such sale is effectively subject to VAT at zero percent (0%) rate. The pertinent international agreement governing the present case is Article 3 of the March 13, 2003 Cooperation Agreement between the Government of the Republic of the Philippines and the International Organization for Migration (PH-IOM Agreement), which provides as follows: "Article 3 1. The Organization shall enjoy in the Republic of the Philippines the same privileges and immunities as those granted to the specialized agencies of the United Nations by virtue of the Convention on the privileges and immunities of the specialized agencies of 21 November 1947. 2. In particular, the Organization shall be exempt from all indirect taxes for purchases or articles intended for official use. 3. The Organization shall be exempt from all taxes and customs duties in respect of the importation of motor vehicles for its official use in the Philippines. The importation of the additional motor vehicles by the Organization shall be subject to prior consultation and approval of the Government. None of the Organization's motor vehicles may be sold or transferred to non-tax-exempt persons or entities without the prior approval of the Government and without the corresponding customs and duties being paid on them by such non-tax exempt buyers. However, the motor vehicles may be exported subject to existing laws and regulations of the Philippine Government. CAIHTE 4. The Organization shall not sell within the country the goods imported duty free, except with the Government's approval and under conditions stipulated by the Government." Under the above provisions, IOM shall enjoy the same privileges and immunities as those granted to specialized agencies of the United Nations and shall be exempt from indirect taxes for purchases or articles intended for its official use. In view of the foregoing, this Office is of the opinion and so holds that the sale of one (1) unit of 2023 Toyota Fortuner 2.4 4x2 Dsl A/T for the official use of the IOM, being an exempt entity, shall be subject to VAT at zero percent (0%) rate pursuant to Section 106 (A) (2) (b) of the Tax Code, 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 it will be disclosed upon investigation that actual facts are different, then this ruling shall be without force and effect insofar as the herein parties are concerned. aScITE Very truly yours, Commissioner of Internal Revenue By: (SGD.) LARRY M. BARCELO Assistant Commissioner Legal Service