United Nations Population Fund (UNFPA)

June 21, 2021 DA-ITAD BIR RULING NO. 016-21 Sec. 106 (A) (2) (b), 1997 NIRC, as amended Article II, Section 8, UN Convention; BIR Ruling No. ITAD-314-14 United Nations Population Fund (UNFPA) 15th Floor, North Tower, Rockwell Business Center Sheridan Sheridan Street corner United Street 1550 Mandaluyong City Attention: _________________ Country Representative Gentlemen : This refers to your Note with Ref. No. PHL/GEN-131 dated March 17, 2021 referred to this Office by the Department of Finance and the Department of Foreign Affairs (DFA),requesting for exemption from payment of value-added tax (VAT) and ad valorem tax on the local purchase of a motor vehicle for the official use of the United Nations Population Fund (UNFPA),specifically described as follows: MAKE YEAR COLOR CHASSIS NUMBER ENGINE NUMBER Toyota Hiace SG Elite 2T ZS-007 2020 Luxury Pearl Toning JTFWA3APXL8006423 1GD8560001 In reply, please be informed that Section 106 (A) (2) (b) of the National Internal Revenue Code (Tax Code) of 1997, as amended by Republic Act No. 10963, otherwise known as the Tax Reform for Acceleration and Inclusion (TRAIN) Act, states, to wit: "SEC. 106. Value-Added Tax or 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." Generally, every sale of goods or properties by VAT-registered persons is subject to VAT at 12%.However, if such sale is made to persons or entities that are exempt from VAT, such sale is effectively subject to VAT at zero percent (0%) rate. The pertinent international agreement governing the present case is the Agreement between the Government of the Republic of the Philippines and the United Nations Development Programme 1 (1977 PH-UNDP Agreement).This is pursuant to the October 21, 1996 letter of then Acting Secretary of Foreign Affairs Federico M. Macaranas to UNFPA Under-Secretary-General Nafis Sadik, M.D. of the Philippines' acceptance to the arrangement that the basic assistance agreement between the Philippines and UNDP applies to UNFPA, mutatis mutandis .Hence, paragraph 1, Article IX of the 1977 PH-UNDP Agreement provides as follows: HEITAD "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." Under paragraph 1 above, the Philippines shall grant the same privileges and immunities under the Convention on the Privileges and Immunities of the United Nations 2 (UN Convention) to UNDP, its property, funds and assets, and to its officials, resident representative and other members. In this connection, Section 8, Article II of the UN Convention provides: "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." The aforecited provision of the UN Convention 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 UN. 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. 3 In view of the foregoing, the local sale of one (1) unit of 2020 Toyota Hiace SG Elite 2T ZS-007 for the official use of the UNFPA, being an exempt entity, shall be subject to VAT at zero percent (0%) rate pursuant to Section 106 (A) (2) (b) of the Tax Code, 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 Footnotes 1. Signed on July 21, 1977. 2. Adopted by the General Assembly on February 13, 1946. 3. BIR Ruling No. ITAD-46-07 dated April 11, 2007 citing VAT Ruling No. 143-90 which revoked VAT Ruling No. 176-89.