Japan International Cooperation Agency

March 27, 2019 DA ITAD BIR RULING NO. 010-19 Sections 109 (1) (K), 106 (A) (2) (b), Tax Code of 1997, as amended; Article XI, PH-Japan TCA; BIR Ruling No. ITAD-010-17 Japan International Cooperation Agency 40th Floor Yuchengco Tower, RCBC Plaza, Ayala Avenue 1227 Makati City Gentlemen : This refers to your Note No. 83-19 dated 13 February 2019, referred to this office by the Department of Finance and the Department of Foreign Affairs, requesting exemption from the payment of ad valorem and value-added taxes (VAT) on the local purchase of motor vehicles for the official use of the Japan International Cooperation Agency (JICA), specifically described, as follows: HTcADC MAKE MODEL COLOR CHASSIS NO. ENGINE NO. Nissan Terra 2.5L 4x4 VL A/T 2019 Brilliant Silver MNTJCND23Z0000437 YD25797480T Nissan Terra 2.5L 4x4 VL A/T 2019 Brilliant Silver MNTJCND23Z0001120 YD25813521T In reply, please be informed of Section 109 (K) of the National Internal Revenue Code (Tax Code) of 1997, as amended, which provides: "SEC. 109. Exempt Transactions. (1) Subject to the provisions of Subsection (2) hereof, the following transactions shall be exempt from value-added tax: xxx xxx xxx (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;" Moreover, Section 106 (A) (2) (b) of the Tax Code, provides: "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. xxx xxx xxx" Based on the foregoing, the sale of goods by VAT-registered persons to entities which are exempt under international agreements shall be subject to zero percent (0%) VAT pursuant to Sections 106 (A) (2) (b) of the Tax Code of 1997, as amended by Republic Act No. 10963, otherwise known as the Tax Reform for Acceleration and Inclusion Act, in relation to Section 109 (1) (K). In connection thereto, Article XI of the Agreement on Technical Cooperation between the Government of the Republic of the Philippines and the Government of Japan 1 (PH-Japan TCA) provides as follows: "Article XI 1. It is confirmed that JICA may maintain its overseas office in the Republic of the Philippines (hereinafter referred to as the "Office") with a resident representative and his/her staff to be dispatched from Japan (hereinafter referred to as "Representative and the Staff" respectively) who perform the duties to be assigned to them by JICA relative to the technical cooperation programs under this Agreement in the Republic of the Philippines. 2. The Government of the Republic of the Philippines shall: (1) x x x (2) (a) exempt the Office from consular fees, taxes including value added tax, customs duties and fiscal charges, as well as from the requirements of obtaining certificate of foreign exchange coverage, in respect of the importation of the equipment, machinery, motor vehicles and materials necessary for activities of the Office; (b) exempt the Office from taxes including value added tax and fiscal charges in respect of the local purchase of the equipment, machinery, motor vehicles , materials and professional and technical services necessary for the functions of the Office; and (c) exempt the Office from taxes including income tax and fiscal charges imposed on or in connection with office expenses remitted from abroad. x x x" (Underscoring ours) Based on the above provisions, tax exemption privileges shall be accorded by the Philippine Government to the JICA Office in the Philippines on its local purchase of motor vehicles which are necessary for its functions. In view of all the foregoing, this Office is of the opinion that the JICA Office in the Philippines is exempt from VAT and ad valorem tax on its local purchase of two (2) 2019 Nissan Terra 2.5L VL 7A/T, for its official use, pursuant to Article XI of the PH-Japan TCA, in relation to Section 109 (1) (K) of the Tax Code of 1997, as amended. Moreover, such sale by VAT registered local supplier to JICA is subject to zero percent (0%) VAT pursuant to Section 106 (A) (2) (b) of the Tax Code. This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be disclosed that the actual facts are different, then this ruling shall be without force and effect insofar as the herein parties are concerned. aScITE Very truly yours, (SGD.) LARRY M. BARCELO OIC-Assistant Commissioner Legal Service Footnotes 1. Ratified by the Philippine President on 23 December 2010; concurred to by the Philippine Senate in its Resolution No. 36, adopted on 14 March 2011; entered into force on 08 April 2011 upon receipt by the Government of Japan of the Philippine notification as conveyed by the Embassy of Japan in its Note Verbale dated 08 April 2011.