Australian Embassy

October 7, 2019 DA ITAD BIR RULING NO. 038-19 Principle of Reciprocity; BIR Ruling No. ITAD-300-11 Australian Embassy Level 23 Tower 2 RCBC Plaza 6819 Ayala Avenue, Makati City 1200 Gentlemen : This has reference to your Note No. 416/19 dated September 5, 2019 referred to this Office by the Department of Finance and the Department of Foreign Affairs (DFA), requesting for the exemption from the payment of value-added (VAT) and ad valorem taxes on the purchase of a previously owned and tax exempt motor vehicle for personal use of AAA , __________ of the Australian Embassy from BBB , __________, also of the same Embassy, specifically described as follows: Make Model Year Color Chassis Number Engine Number Plate Number Honda CRV 2005 Beige PADRD47405V300491 PNKD24-5300497 0000 In reply, please be informed that Article 34 of the Vienna Convention on Diplomatic Relations reads: " 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" Thus, 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. In other words, purchases by that Embassy or its agents of goods 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 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 September 18, 2019, that the Government of Australia allows similar exemption to the Philippine Embassy and/or its personnel on their purchase of motor vehicles in Australia. Hence, since the transferor and the transferee of the subject motor vehicle, are exempt individuals, the sale of one (1) unit of 2005 Honda CRV by BBB to AAA, for the latter's personal use, shall continue 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 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 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. CAIHTE Very truly yours, Commissioner of Internal Revenue By: (SGD.) LARRY M. BARCELO OIC-Assistant Commissioner Legal Service