Australian Embassy

January 18, 2023 DA ITAD BIR RULING NO. 005-23 Principle of Reciprocity Australian Embassy Level 23, Tower 2, RCBC Plaza 6819 Ayala Avenue 1200 Makati City Attention: AAA __________ Gentlemen : This refers to your Note No. 523/22 dated December 21, 2022 referred to this Office by the Department of Finance and the Department of Foreign Affairs (DFA), requesting for the exemption from the payment of value-added (VAT) and ad valorem taxes on the sale of a second-hand motor vehicle by BBB, Second Secretary of the Australian Embassy to CCC, First Secretary of the same Embassy, specifically described as follows: MAKE YEAR COLOR FRAME NUMBER ENGINE NUMBER Toyota Fortuner 2010 Silver MR0ZR69G600101237 2KD5099285 In reply, please be informed that Section 105 of the National Internal Revenue Code of 1997, as amended (Tax Code) provides, to wit: SEC. 105. Persons Liable . Any person who, in the course of trade or business, sells, barters, exchanges, leases goods or properties, renders services, and any person who imports goods shall be subject to the value-added tax (VAT) imposed in Sections 106 to 108 of this Code. x x x (Emphasis ours) HTcADC The phrase "in the course of trade or business" means the regular conduct or pursuit of a commercial or an economic activity, including transactions incidental thereto, by any person regardless of whether or not the person engaged therein is a non-stock, nonprofit private organization (irrespective of the disposition of its net income and whether or not it sells exclusively to members or their guests), or government entity. Except for zero-rated sale of goods and services, VAT is generally imposed at 12%. In this case, BBB is not a VAT-registered taxpayer and is not engaged in trade or business. Hence, the subject sale of a 2010 Toyota Fortuner by BBB to CCC is exempt from VAT. Such sale is likewise exempt from ad valorem tax pursuant to Section 9 of Revenue Regulations No. 25-2003. CAIHTE This ruling is issued on the basis of the facts as represented. However, if it will be disclosed upon investigation 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 Assistant Commissioner Legal Service