United Nations Development Programme

October 30, 2020 DA ITAD BIR RULING NO. 022-20 Sec. 106 (A) (2) (c), 1997 NIRC, as amended; Article II (Section 8), Convention on the Privileges and Immunities of the United Nations; BIR Ruling No. ITAD-116-11 United Nations Development Programme 15th Floor, Rockwell Business Center Sheridan Tower 1, United Street corner Sheridan Street Highway Hills, 1550 Mandaluyong City Gentlemen : This refers to your Notes dated September 1, 2020, referred to this Office by the Department of Finance and the Department of Foreign Affairs, requesting for a ruling that the local purchase of three (3) units of motor vehicle for the official use of the United Nations Development Programme (UNDP) is exempt from Value-Added Tax (VAT) and ad valorem tax. The motor vehicles are specifically described as follows: HTcADC Make Year Color Chassis Number Engine Number Toyota Fortuner 4x4 V Dsl A/T 2020 Gray Metallic MHFHA3FS8L0569410 1GD4819273 Hawk Sunra/2000 W DC Brushless Motor 2020 LXRBD1GW5L0900275 ABA701800318 Hyundai Kona Electric (EV) 2020 Ceramic Blue KMHK281GFLU032110 EM16K35600BJ In reply, please be informed that under Article IX (1) of the Agreement between the Government of the Philippines and the United Nations Development Programme , 1 the Philippines agreed to accord to the UNDP, its property, funds and assets, among others, the same privileges and immunities under the Convention on the Privileges and Immunities of the United Nations ("UN Convention"), thus: " 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." These privileges include the remission or return of the amount of tax imposed on the official purchases of the UNDP, including local purchases of motor vehicles for its official use, pursuant to Section 8, Article II of the UN Convention, to wit: " 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 exemption of particular transactions under international agreements are likewise recognized and embedded in the domestic law of the Philippines, specifically Section 109 (1) (K) of the National Internal Revenue Code (NIRC) of 1997, as amended, which reads 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;" Moreover, pursuant to Section 106 (A) (2) (b) of the NIRC, 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 VAT at zero percent (0%) rate, are treated as effectively zero-rated transactions, to wit: " 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. 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." Accordingly, the sale of one (1) unit of 2020 Toyota Fortuner, 2020 Hawk Sunra/2000 and Hyundai Kona Electric by the VAT-registered local car dealers for the official use of UNDP 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. aScITE 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 OIC-Assistant Commissioner Legal Service Footnotes 1. Signed on July 21, 1977.