World Food Programme

February 26, 2018 DA ITAD BIR RULING NO. 007-18 Sec. 106 (A) (2) (b), Tax Code, as amended; Article V, Paragraph 2, PH-WFP Agreement; Section 10, UN Convention; BIR Ruling No. ITAD-317-11 World Food Programme 5th GC Corporate Plaza #150 Legazpi St., Legaspi Village Makati City Attention: AAA __________ Gentlemen : This refers to your letter dated 16 January 2018 indorsed to this Office by the Department of Finance and the Department of Foreign Affairs, requesting exemption from value-added and ad valorem taxes on the local purchase of one (1) unit of motor vehicle for the official use of the World Food Programme (WFP), specifically described as follows: HTcADC Make Model Chassis No. Engine No. Toyota Camry 2.5V A/T 2018 MR053AK50H9000470 2ARU441629 In reply, please be informed that Paragraph 2, Article V of the Agreement between the World Food Programme and the Government of the Republic of the Philippines 1 (PH-WFP Agreement) provides, as follows: " Article V FACILITIES, PRIVILEGES AND IMMUNITIES xxx xxx xxx 2. The Government shall apply the provisions of the Convention on the Privileges and Immunities of the Specialized Agencies to the World Food Program, its property, funds and assets and its officials and consultants. x x x" Accordingly, Section 10, Article III of the Convention on the Privileges and Immunities of the Specialized Agencies of the United Nations (UN Convention) , states that: " Article III PROPERTY, FUNDS AND ASSETS xxx xxx xxx Section 10. While the specialized agencies will not, as a general rule, claim exemption from excise duties and from taxes on the sale of movable and immovable property which form part of the price to be paid, nevertheless when the specialized agencies are making important purchases for official use of property on which such duties and taxes have been charged or chargeable, States parties to this Convention will whenever possible, make appropriate administrative arrangements from the remission or return of the amount of duty or tax." The aforecited provision of the Agreement clearly requires that to be entitled to a possible remission or return of the amount of duty or tax, the subject purchase must be for official use of the WFP. But in lieu of remission or return of the amount of duty or tax related to the purchase for official use, a tax exemption privilege is instead granted. 2 Moreover, in relation to value-added tax (VAT), Section 109 (1) (K) of the amended 1997 National Internal Revenue Code (Tax Code, as amended), provides as follows: "SEC. 109. Exempt Transactions. (1) Subject to the provisions of Subsection (2) hereof, the following transactions shall be exempt from the value-added tax: x x x (K) Transactions which are exempt under international agreements to which the Philippines is a signatory or under special laws, except those under Presidential Decree No. 529"; Furthermore, pursuant to Section 106 (A) (2) (b) of the Tax Code, as amended, sales of goods by VAT-registered sellers to persons or entities whose exemption under special laws or international agreements to which the Philippines is a signatory effectively subjects such sales to VAT at zero percent (0%) rate, thus: "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: Provided, x x x (2) The following sales by VAT-registered persons shall be subject to zero percent (0%) rate: x x x (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." aScITE In view thereof, this Office is of the opinion as it hereby rules that the sale of the 2018 Toyota Camry 2.5V A/T by the VAT-registered local car dealer for the official use of WFP, shall be subject to VAT at zero-percent (0%) rate, pursuant to Section 106 (A) (2) (b) of the Tax Code, as amended, and, exempt from ad valorem tax , pursuant to the PH-WFP Agreement and the UN Convention. (BIR Ruling No. ITAD-317-11 dated December 15, 2011) 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 Head Revenue Executive Assistant Legal Service Footnotes 1. Signed on July 2, 1968. 2. BIR Ruling No. ITAD-46-07 dated 11 April 2007 citing VAT Ruling No. 143-90 which revoked VAT Ruling No. 176-89.