Royal Embassy of Saudi Arabia

November 24, 2021 DA ITAD BIR RULING NO. 034-21 Principle of Reciprocity Royal Embassy of Saudi Arabia 128 H.V. Dela Costa corner Sanchez Streets Salcedo Village 1227 Makati City Gentlemen : This refers to your Note No. 10/254 dated September 29, 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 Royal Embassy of Saudi Arabia, specifically described as follows: MAKE YEAR COLOR FRAME NUMBER ENGINE NUMBER Mazda CX-8 4x2 AT 2021 Jet Black PP1KGA334MM000300 PY31167861 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 of goods and/or services shall, in general, be subject to the VAT and ad valorem tax imposed 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 Royal Embassy of Saudi Arabia on their local purchase of motor vehicles since it appears from the DFA VAT Matrix dated November 12, 2021 that the Government of Saudi Arabia allows similar exemption to the Philippine Embassy on its purchase of motor vehicles in Saudi Arabia. In view thereof, the local sale of one (1) unit of 2021 Mazda CX-8 4x2 AT for the official use of the Royal Embassy of Saudi Arabia, being an exempt entity, 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. This ruling is issued on the basis of the facts as represented. However, if it shall 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 Assistant Commissioner Legal Service