United Nations Development Programme

September 7, 2021 DA-ITAD BIR RULING NO. 023-21 Sec. 106 (A) (2) (b), Tax Code of 1997, as amended; Article II (Section 8), UN Convention; BIR Ruling No. ITAD-185-13 United Nations Development Programme 15th Floor North Tower, Rockwell Business Center Sheridan Street corner United Street Highway Hills 1554 Mandaluyong City Attention: ________________ Operations Manager Gentlemen : This refers to your letter dated August 5, 2021 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 a motor vehicle for the official use of the United Nations Development Program (UNDP),specifically described as follows: MAKE YEAR COLOR CHASSIS NUMBER ENGINE NUMBER Hyundai Ioniq 1.6 GLS 6DCT 2020 Phantom Black KMHC851CGKU149342 G4LEKU230566 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 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." 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 paragraph 1, Article IX of the Agreement between the Government of the Republic of the Philippines and the United Nations Development Programme, 1 which 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 the 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 provides that when the UN is making important purchases for official use, it is entitled to a remission or return of the amount of duty or tax on the said purchase. In view of the foregoing, the local sale of one (1) unit of 2020 Hyundai Ioniq 1.6 GLS 6DCT for the official use of the UNDP, 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 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 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. 2. Adopted by the General Assembly on February 13, 1946.