Asian Development Bank

January 30, 2023 DA ITAD BIR RULING NO. 008-23 Section 106 (A) (2) (b), NIRC of 1997, as amended; Section 9, Revenue Regulations No. 25-2003; Section 34, Article IX, PH-ADB Agreement; BIR Ruling No. ITAD-011-14 Asian Development Bank 6 ADB Avenue 1550 Mandaluyong City Attention: AAA __________ Gentlemen : This refers to your Letter No. RPI-2022-1135 dated January 04, 2023, referred to this Office by the Department of Finance and the Department of Foreign Affairs, requesting for a ruling that the local purchase of a motor vehicle for the official use of the Logistics Management Unit of the Asian Development Bank (ADB) is exempt from value-added tax (VAT) and ad valorem tax. The motor vehicle is specifically described as follows: MAKE YEAR COLOR FRAME NUMBER ENGINE NUMBER Toyota Hiace GL Grandia 2.8 DSL AT 2023 Silver Mica Metallic JTFPA9AP0N8029302 1GD9042702 In reply, please be informed that Section 106 (A) (2) (b) of the National Internal Revenue Code (NIRC) of 1997, as amended by Republic Act No. 10963 , otherwise known as the Tax Reform for Acceleration and Inclusion (TRAIN) Act, provides, viz. : 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." Relative thereto, Article IX, Section 34 (a) of the Agreement between the Asian Development Bank and the Government of the Republic of the Philippines Regarding the Headquarters of the Asian Development Bank (PH-ADB Agreement) signed on December 22, 1966 provides that the ADB, its property, operations and transactions shall be exempt from all taxation, direct and indirect, national and local, and any obligation for the payment, withholding and collection of any tax, to wit: "Article IX Property of the Bank and Taxation xxx xxx xxx "SEC. 34. The Bank, its property and its operations and transactions shall be exempt from: a) All taxation and any obligation for the payment, withholding or collection of any tax or duty. The Bank will not claim exemption from taxes or charges which are no more than payments for public utility services; b) All customs duties and other levies on any goods, articles, including motor vehicles, spare parts and publications, imported or exported by the Bank for its official use, and any obligation for the payment, withholding or collection of any customs duties. The goods and articles, including vehicles, spare parts and publications imported under such exemption will not be sold in the Republic of the Philippines except under conditions agreed upon with the Government; and c) All prohibitions and restrictions on imports and exports in respect of goods or articles, including motor vehicles, spare parts and publications intended for the official use of the Bank." aScITE Hence, this Office is of the opinion as it hereby rules that the sale of one (1) unit of 2023 Toyota Hiace GL Grandia 2.8 DSL AT by the VAT-registered local car dealer for the official use of ADB, an exempt entity pursuant to the PH-ADB Agreement, is effectively zero-rated and thus subject to VAT at zero-percent (0%) rate pursuant to Section 106 (A) (2) (b) of the NIRC, as amended. Such sale is likewise exempt from ad valorem tax pursuant to the PH-ADB Agreement, as implemented under Section 9 of Revenue Regulations No. 25-2003. DETACa 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, (SGD.) LARRY M. BARCELO Assistant Commissioner Legal Service