Embassy of the Russian Federation

November 8, 2019 DA ITAD BIR RULING NO. 042-19 Principle of Reciprocity; BIR Ruling No. ITAD-372-12 Embassy of the Russian Federation 1245 Acacia Road, Dasmarias Village Makati City Gentlemen : This has reference to your Note No. 567-n dated September 10, 2019 referred to this Office by the Department of Finance and the Department of Foreign Affairs (DFA), requesting exemption from the payment of value-added (VAT) and ad valorem taxes on the purchase from the Embassy of the Russian Federation of a previously owned and tax-exempt motor vehicle for personal use of AAA , an employee of the same Embassy, specifically described as follows: Make Model Year Color Chassis Number Engine Number Plate Number Toyota Altis 1.6 V A/T 2012 Medium Silver Metallic MR053REE104141902 1ZRX209925 _______ 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 Embassy of the Russian Federation and/or its personnel on their local purchase of motor vehicles since it appears from the list submitted by the DFA dated October 16, 2019, that the Government of the Russian Federation allows similar exemption to the Philippine Embassy and/or its personnel on their purchase of motor vehicles in the Russian Federation. Hence, since the transferor and the transferee of the subject motor vehicle, are exempt entity and individual, the sale of one (1) unit of 2012 Toyota Altis 1.6 V A/T by the Embassy of the Russian Federation 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. Very truly yours, Commissioner of Internal Revenue By: (SGD.) LARRY M. BARCELO OIC-Assistant Commissioner Legal Service