World Health Organization

May 30, 2019 DA ITAD BIR RULING NO. 020-19 Section 106 (A) (2) (b), 1997 NIRC, as amended; Section 9, Revenue Regulations No. 25-2003; Sections 11 and 12, Article IV, WHO-PH Agreement; BIR Ruling No. ITAD-103-12 World Health Organization Regional Office for the Western Pacific United Nations Avenue P.O. Box 2932, 1000 Manila Attention: AAA __________ Gentlemen : This refers to your letter dated May 1, 2019 indorsed to this Office by the Department of Finance and the Department of Foreign Affairs, requesting exemption from value-added (VAT) and ad valorem taxes on the local purchase of one (1) unit of motor vehicle for the official use of the World Health Organization (WHO), specifically described as follows: Make Model Chassis No. Engine No. Hyundai H350 Mini Bus 2.5 CRDi 6MT (Dsl) 2018 KMFAB17RPJK009641 D4CBG107031 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. : "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, Sections 11 & 12, Article IV of the Agreement between the World Health Organization and the Government of the Republic of the Philippines 1 ( PH-WHO Agreement ) provides, viz. : " Article IV PROPERTY, FUNDS AND ASSETS xxx xxx xxx Section 11. The Organization, its assets, income and other property, shall be: (a) exempt from all direct and indirect taxes. It is understood, however, that the Organization will not claim exemption from taxes which are, in fact, no more than charges for public utility services; (b) exempt from customs duties, prohibitions and restrictions on imports and exports in respect of medical supplies, or any other goods or articles imported or exported by the Organization for its official use. It is understood, however, that such medical supplies, goods or articles, imported under such exemption will not be sold in the Republic of the Philippines except under conditions agreed with the Republic of the Philippines; (c) exempt from customs duties, prohibitions and restrictions on imports and exports in respect of their publications. x x x" Section 12. While the Organization will not, as a general rule, in case of minor purchases, claim exemption from excise duties, and from taxes on the movable and immovable property which form part of the price to be paid, nevertheless when the Organization is making important purchases for official use of property on which such duties and taxes have been charged or are chargeable, the Government of the Republic of the Philippines shall make appropriate administrative arrangements for the remission or return of duty or tax." HTcADC The aforecited provision of the Agreement 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 World Health Organization. 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. 2 In relation thereto, Section 109 (1) (K) of the 1997 National Internal Revenue Code (NIRC), as amended, provides as follows: "SEC. 109. Exempt Transactions. (1) Subject to the provisions of Subsection (2) hereof, the following transactions shall be exempt from the 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;" Hence, this Office is of the opinion as it hereby rules that the sale of one (1) unit of 2018 Hyundai H350 Mini Bus 2.5 CRDi 6MT (Dsl) by the VAT-registered local car dealer for the official use of WHO, an exempt entity pursuant to the PH-WHO Agreement, shall be 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-WHO Agreement, as implemented under 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. ATICcS Very truly yours, Commissioner of Internal Revenue By: (SGD.) LARRY M. BARCELO OIC-Assistant Commissioner Legal Service Footnotes 1. Signed on July 22, 1951. 2. BIR Ruling No. ITAD-46-07 dated 11 April 2007 citing VAT Ruling No. 143-90 which revoked VAT Ruling No. 176-89.