Embassy of Japan

September 19, 2018 DA ITAD BIR RULING NO. 042-18 Principle of Reciprocity; BIR Ruling No. ITAD-313-11 Embassy of Japan 2627 Roxas Boulevard Pasay City Gentlemen : This has reference to your Note No. 445-18, 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 local purchase of a motor vehicle for the official use of the Embassy of Japan, specifically described as follows: AaCTcI Type of Use: Official Make: Honda Odyssey 2.4 EX CVT AT Model Year: 2018 Color: Crystal Black Frame Number: JHMRC1830JC205569 Engine Number: K24W72424232 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 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 Embassy of Japan and/or its personnel on their local purchase of motor vehicles since it appears from the list submitted by the DFA dated February 2, 2018 that the Government of Japan allows similar exemption to the Philippine Embassy and/or its personnel on their purchase of motor vehicles in Japan. In view thereof, the local purchase of one (1) unit of 2018 Honda Odyssey 2.4 EX CVT AT for the official use of the Embassy of Japan, being an exempt entity, shall be exempt from ad valorem tax and subject to VAT at zero percent (0%) rate pursuant to Section 106 (A) (2) (b) of the NIRC of 1997, as amended. (BIR Ruling No. ITAD-313-11 dated December 2, 2011) 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. Very truly yours, Commissioner of Internal Revenue By: (SGD.) LARRY M. BARCELO OIC-Assistant Commissioner Legal Service