Australian Embassy

November 16, 2020 DA ITAD BIR RULING NO. 024-20 Principle of Reciprocity; BIR Ruling No. DA-ITAD-015-17; BIR Ruling No. ITAD-300-11 Australian Embassy Level 23-Tower 2, RCBC Plaza 6819 Ayala Avenue 1200 Makati City Gentlemen : This has reference to your Note No. 141/20 dated July 14, 2020, referred to this Office by the Department of Finance and the Department of Foreign Affairs (DFA), requesting for a ruling that the local purchase of a previously-owned and tax-exempt motor vehicle for the personal use of AAA (AAA) , __________ of the Australian Embassy, from BBB (BBB) , _____, also of the same Embassy, is exempt from Value-Added Tax (VAT) and ad valorem tax. The motor vehicle is specifically described as follows: HTcADC MAKE YEAR COLOR FRAME NUMBER ENGINE NUMBER Toyota Fortuner 2009 Lithium MHFZX69G607011490 2TR-6650345 In reply, please be informed that Article 34 of the Vienna Convention on Diplomatic Relations states that 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, thus: "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" In other words, purchases by the Embassy or its agents 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 (NIRC) 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 October 1, 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, since the transferor and the transferee are both exempt individuals, the local sale of one (1) unit of 2009 Toyota Fortuner by BBB to AAA continues to be subject to VAT at zero-percent (0%) rate pursuant to Section 106 (A) (2) (b) of the NIRC of 1997, as amended. Such second-hand 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