Embassy of the Federal Republic of Germany

February 26, 2018 DA ITAD BIR RULING NO. 006-18 Sec. 106 (A) (2) (b) of 1997 NIRC as amended; Paragraph 4 (a), May 6, 2002 Diplomatic Exchange of Notes; Technical Co-operation Agreement of September 7, 1971; BIR Ruling No. ITAD-009-13 Embassy of the Federal Republic of Germany 25/F Tower 2, RCBC Plaza 6819 Ayala Avenue (cor. Sen. Gil Puyat Avenue) 1261 Makati City Attention: AAA __________ Gentlemen : This refers to your KFZ Note No. 1/2018 dated January 11, 2018 referred to this Office by the Department of Finance (DOF) and the Department of Foreign Affairs (DFA), requesting for the exemption from the payment of value-added tax (VAT) and ad valorem tax on the local purchase of a motor vehicle for the official use of the Conflict Sensitive Resource and Asset Management (COSERAM) Project of the Deutsche Gesellschaft fr Internationale Zusammenarbeit ( GIZ ), 1 GIZ Office, Manila, specifically described as follows: AIDSTE Organization: GIZ Office Manila-Conflict Sensitive Resource and Asset Management (COSERAM) Project Type of Use: Official Make: Toyota Innova 2.8 G Diesel M/T Model Year: 2018 Color: Thermalyte Frame Number: PA2GA8EMXH0035355 Engine Number: 1GD0368729 In reply, please be informed that Section 106 (A) (2) (b) of the 1997 National Internal Revenue Code, as amended (1997 NIRC, as amended) provides, viz. : "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, 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." In relation thereto, the Agreement between the Government of the Federal Republic of Germany and the Government of the Republic of the Philippines Concerning Technical Co-operation (Technical Co-operation Agreement) executed on September 7, 1971, together with the Diplomatic Exchange of Notes dated May 6, 2002 approving the Arrangement for the continuation of the GTZ Office in Manila, partakes the nature of an international agreement as provided in Section 106 (A) (2) (b) of the 1997 NIRC, as amended. Paragraph 4 (a) of the aforementioned Diplomatic Exchange of Notes is, in effect, a grant of exemption from VAT. It provides: "4. The Government of the Republic of the Philippines shall make the following contributions: It shall (a) exempt the material and motor vehicles supplied for the Office from taxes , licenses, harbour dues, import and export duties and other public charges, as well as storage fees, and ensure that such material is cleared by customs without delay. The aforementioned exemptions shall, with regard to value-added tax (VAT), also apply to material and services (including consulting services) procured in the Republic of the Philippines, as well as to the renting of office premises and accommodation for seconded experts"; (Underscoring ours) In view thereof, the local purchase of a 2018 Toyota Innova 2.8 G Diesel M/T for the official use of the GIZ office Manila-COSERAM, being an entity exempt from VAT, pursuant to the aforementioned Technical Co-operation Agreement, Diplomatic Exchange of Notes and Section 109 (K) of the NIRC, shall be subject to VAT at zero-percent (0%) rate pursuant to Section 106 (A) (2) (b) of the 1997 NIRC, as amended. (BIR Ruling No. ITAD-009-13 dated January 22, 2013) Moreover, the locally purchased motor vehicle for the official use of the GIZ office Manila-COSERAM, shall likewise be exempt from ad valorem tax, since it is exempt from taxes pursuant to the Technical Co-operation Agreement. 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. AaCTcI Very truly yours, Commissioner of Internal Revenue By: (SGD.) LARRY M. BARCELO Head Revenue Executive Assistant Legal Service Footnotes 1. GIZ is the new name of Deutsche Gesellschaft fr Technische Zusammenarbeit ( GTZ ) effective January 1, 2011, per Note No. 275/10 dated December 1, 2010 of the Embassy of the Federal Republic of Germany and DFA Note No. 11-0197 dated January 31, 2011.