United Nations Development Programme

March 22, 2022 DA ITAD BIR RULING NO. 014-22 Section 106 (A) (2) (c), Tax Code of 1997, as amended; Article II (Section 8), UN Convention; BIR Ruling No. ITAD-185-13 United Nations Development Programme 15th Floor, Rockwell Business Center Sheridan Tower 1, United Street corner Sheridan Street Highway Hills, 1550 Mandaluyong City Attention: _______________ Gentlemen : This refers to your letters dated February 22, 2022 indorsed to this Office by the Department of Finance (DOF) and the Department of Foreign Affairs (DFA), requesting exemption from value-added tax (VAT) and ad valorem tax on the local purchase of motor vehicles for the official use of the United Nations Development Programme (UNDP), specifically described as follows: MAKE YEAR COLOR FRAME NUMBER ENGINE NUMBER Toyota Fortuner 2.8L 4x4 LTD AT 2022 Attitude Black MHFBA3FS6M1045898 1GD5114694 Toyota Fortuner 2.8L 4x4 LTD AT 2022 Attitude Black MHFBA3FS6M1045951 1GD5117339 Under paragraph 1, Article IX of the Agreement between the Government of the Republic of the Philippines and the United Nations Development Programme , 1 the Philippines is obligated to apply the provisions of the Convention on the Privileges and Immunities of the United Nations (UN Convention) to the UNDP, its property, funds and assets, and to its official, including its resident representative and other members, to wit: " Article IX PRIVILEGES AND IMMUNITIES 1. The Government shall apply to the United Nations and its organs, including the UNDP and U.N. subsidiary organs acting as UNDP Executing Agencies, their property, funds and assets, and to their officials, including the resident representative and other members of the UNDP mission in the country, the provisions of the Convention on the Privileges and Immunities of the United Nations." Relative thereto, Article II, Section 8 of the UN Convention states that: " Article II PROPERTY, FUNDS AND ASSETS xxx xxx xxx Section 8. While the United Nations 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 United Nations is making important purchases for official use of property on which such duties and taxes have been charged or are chargeable. Members will, whenever possible, make appropriate administrative arrangements for the remission or return of the amount of duty or tax." Applying the above provisions, UNDP may be entitled to a possible remission or return of the amount of duty or tax paid on its purchases provided the property acquired is for its official use. In this case, it is undisputed that the subject motor vehicles are for the official use of the UNDP. Therefore, UNDP is exempt from the payment of any tax imposed on its acquisition of such properties. Moreover, pursuant to Section 106 (A) (2) (b) of the National Internal Revenue Code of 1997 (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 zero rate, are subject 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. (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." Accordingly, the local sale of two (2) units of 2022 Toyota Fortuner 2.8L 4x4 LTD AT by the VAT-registered local car dealer for the official use of the UNDP is subject to VAT at zero-percent (0%) rate. Such sale is likewise exempt from ad valorem tax pursuant to Section 9 of Revenue Regulations No. 25-2003. 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 Footnotes 1. Signed on July 21, 1977.