Australian Embassy

July 27, 2020 DA ITAD BIR RULING NO. 015-20 Principle of Reciprocity; BIR Ruling No. ITAD-300-11 Australian Embassy Level 23-Tower 2 RCBC Plaza 6819 Ayala Avenue, Makati City 1200 Gentlemen : This refers to your Note No. 079/20 dated February 28, 2020 referred to this Office by the Department of Finance 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 Australian Embassy, specifically described as follows: SDHTEC Type of Use: Official Make: Toyota Hiace Super Grandia Model Year: 2020 Color: White Pearl (Mono tone) Frame Number: JTFWA3AP0L8005278 Engine Number: 1GD8542020 In reply, please be informed that Article 34 of the Vienna Convention on Diplomatic Relations reads: "ARTICLE 34 A diplomatic agent shall be exempt from all dues and taxes, personal or real, national, regional or municipal, except: (a) indirect taxes of a kind which are normally incorporated in the price of the goods and services; xxx xxx xxx" Thus, the tax exemption privilege of an Embassy and its diplomatic agents does not include exemption from VAT and ad valorem tax, which are indirect taxes, on their local purchase of goods and services. In other words, purchases by that Embassy or its agents of goods and/or services shall, in general, be subject to the VAT and ad valorem tax under Sections 106 and 149 of the National Internal Revenue Code of 1997, as amended, respectively. However, applying the principle of reciprocity, this Office may confirm VAT and ad valorem tax exemption to the Australian Embassy and/or its personnel on their local purchase of motor vehicles since it appears from the list submitted by the DFA dated June 29, 2020, that the Government of Australia allows similar exemption to the Philippine Embassy and/or its personnel on their purchase of motor vehicles in Australia. In view thereof, the local sale of one (1) unit of 2020 Toyota Hiace Super Grandia for the official use of the Australian Embassy, being an exempt entity, shall be subject to VAT at zero-percent (0%) rate pursuant to Section 106 (A) (2) (b) of the NIRC of 1997, as amended. 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 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 OIC-Assistant Commissioner Legal Service