DA ITAD BIR Ruling No. 044-10

April 19, 2010 DA ITAD BIR RULING NO. 044-10 Section 34, Vienna Convention on Diplomatic Relations; Revenue Memorandum Circular No. 40-2007; BIR Ruling No. ITAD-47-08 Embassy of the United States of America 1201 Roxas Boulevard, Manila Attention: Ms. Conchita Silva Deputy Program Manager, USAID GEM Program SUBJECT : USAID Project Growth with Equity in Mindanao (GEM) III Program by The Louis Berger Group, Inc. Gentlemen: This refers to your Diplomatic Note No. 1890 dated December 28, 2009, forwarded to this Office by the Department of Finance and the Department of Foreign Affairs, requesting for value-added tax (VAT) exemption on the local purchase of six (6) motor vehicles specifically described hereunder, for the official use of The Louis Berger Group, Inc., as implementing agent of the United States Agency for International Development (USAID) for the project "Growth with Equity in Mindanao III (GEM III) Program", pursuant to the 1951 Economic and Technical Cooperation Agreement between the Government of the United States of America and the Government of the Republic of the Philippines (1951 Agreement). Make Model Color Engine Chassis Year Number Number Black Mica WEAT1 116562 MNCUS4E909W305031 All New Highlight Silver WEAT1 114579 MNCUS4E909W304555 Ford 2009 Cool White WEAT1 116630 MNCUS4E909W305048 Everest 4X4 Black Mica WEAT1 115005 MNCUS4E909W304675 A/T Highlight Silver WEAT1 116029 MNCUS4E909W304901 Highlight Silver WEAT1 101610 MNCUS4E909W301462 In reply, please be informed as follows: Value-added tax Exemption of USAID Article IV, paragraph 1 of the 1951 Agreement provides the basis and lays down the conditions for USAID's exemption from VAT. It states: "Article IV Missions 1. The Government of the Philippines agrees to receive a Special Technical and Economic Mission which will discharge the responsibilities of the Government of the United States of America in the Philippines under this agreement and the Government of the Philippines will, upon appropriate notification from the Ambassador of the United States of America in the Philippines, consider this Mission and its personnel as part of the Diplomatic Mission of the United States of America for the purpose of enjoying privileges and immunities accorded to that Mission and its personnel of comparable rank. Such Mission shall include but not be limited to experts whose services are made available to implement Article II of this agreement." (Emphasis supplied) HEDSCc Accordingly, tax privileges accorded to the US Embassy and its personnel shall be extended by the Philippine Government to the Special Technical and Economic Mission of the United States of America (Mission) tasked to discharge the responsibilities of the Government of the United States of America (USA) in the Philippines under the 1951 Agreement and its personnel of comparable rank, including experts to implement USAID development assistance activities, upon appropriate Notification from the Ambassador of the USA in the Philippines, in accordance with the 1951 Agreement. 1 Pursuant to the Notification from the Ambassador of the USA to the Philippines dated December 18, 2006, the USAID is recognized as the Mission of the USA for discharging the responsibilities of the Government of the USA in the Philippines under the 1951 Agreement. For purposes of enjoying the tax privileges, the USAID, its personnel of comparable rank and its Implementing Agents recognized by the US Embassy, under Section 6 of Revenue Memorandum Circular (RMC) No. 40-2007 dated June 14, 2007, as part of USAID for purposes of implementing development assistance activities pursuant to the 1951 Agreement, shall be considered as part of the diplomatic mission entitled to direct tax exemption pursuant to the Vienna Convention on Diplomatic Relations and indirect tax exemption pursuant to the Tax Code of 1997, as amended and its implementing rules and regulations. 2 For each of USAID's activities, the USA Department of State, through USAID, will select a Contractor to serve as its Implementing Agent. The BIR shall recognize the selected Implementing Agent, excluding its personnel and staff, as part of the USAID for purposes of implementing USAID development assistance activities and shall be accorded the appropriate tax treatment under the 1951 Agreement upon receipt of a Note Verbal from the Ambassador of the US Embassy in the Philippines, duly indorsed by the DFA, with information as to the name of such person or entity, and the start and end dates for which the agency relationship is in effect. 3 Hence, under Notification from the Ambassador of the USA dated December 7, 2009, the Louis Berger Group, Inc. is recognized as an Implementing Agent of the USAID in the Philippines, and in whose favor the BIR has issued Certification No. 2010-018 dated February 8, 2010 confirming its status as such. Therefore, pursuant to RMC No. 40-2007, the local purchase of 6 units 2009 Ford Everest 4X4 A/T for the official use of The Louis Berger Group, Inc., in connection with the Growth with Equity in Mindanao III (GEM III) Program, is subject to VAT at zero percent, provided that : the subject vehicles shall be registered in the name of USAID for the GEM III Program. (BIR Ruling No. DA-ITAD-47-08 dated June 30, 2008) Furthermore, please note that all sales to the USAID's Implementing Agents in connection with the programs covered by RMC No. 40-2007 must be issued a VAT invoice/official receipt for each sale by the VAT-registered sellers containing the following information: cAHIaE a. Name of seller and a statement that such seller is a VAT-registered person, followed by his Tax Identification Number (TIN); b. Name and address of the USAID implementing agent, together with the words, "USAID, by X Co., the Implementing Agent for (Name of Program/Project)"; c. Current and valid VAT Exemption Certificate Number of USAID; d. The total amount which the purchaser pays or is obligated to pay to the seller, Provided, that (i) The amount of the VAT shall be shown as a separate item in the invoice or receipt; or (ii) The term "ZERO RATED SALE" or "EXEMPT SALE", as appropriate, is written or printed prominently on the face of the invoice/receipt; e. The date of transaction, quantity, unit cost and description of the goods or properties or nature of the services. 4 This ruling is being issued on the basis of the foregoing facts as presented. However, if upon investigation, it will 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.) MARISSA O. CABREROS OIC-Assistant Commissioner Legal Service Footnotes 1. Section 4, Revenue Memorandum Circular No. 40-2007. 2. Section 5, ibid. 3. Section 6, ibid. 4. Section 8, ibid.