DA ITAD BIR Ruling No. 045-13

September 30, 2013 DA ITAD BIR RULING NO. 045-13 Principle of Reciprocity; BIR Ruling No. ITAD-372-12 Embassy of the Russian Federation 1245 Acacia Road, Dasmarias Village Makati City Attention: Alexey Makarov Attach Gentlemen : This has reference to your Note No. 98-N dated August 30, 2013 referred to this Office by the Department of Finance (DOF) and the Department of Foreign Affairs (DFA),requesting for the exemption from the payment of value-added tax (VAT) on the local purchase of a motor vehicle for personal use of Mr. Alexey Makarov, Attach of the Embassy of the Russian Federation, specifically described as follows: Type of Use: Personal Make: Honda Civic 1.8 E Automatic Transmission Model Year: 2013 Color: Taffeta White Frame Number: MRHFB2630DP010242 Engine Number: R18Z12302971 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; IaDSEA xxx xxx xxx" Thus, the tax exemption privilege of an Embassy and its diplomatic agents does not include exemption from VAT on its local purchases of goods and services. In other words, purchases by that Embassy of goods and/or services shall, in general, be subject to the VAT prescribed under Sections 106 and 108 of the National Internal Revenue Code of 1997, as amended. However, applying the principle of reciprocity, this Office may confirm exemption of the Embassy of the Russian Federation and/or its personnel on their local purchase of motor vehicles it appearing from the list submitted by the DFA dated July 23, 2013 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, the local purchase of one (1) unit of 2013 Honda Civic 1.8 E Automatic Transmission for personal use of Mr. Alexey Makarov, Attach of the Embassy of the Russian Federation is exempt from VAT. (BIR Ruling No. ITAD-372-12 dated November 13, 2012) As for the sale made by a VAT-registered business establishment to the qualified foreign embassy, it shall enjoy the benefit of zero percent (0%) VAT pursuant to Revenue Memorandum Order No. 22-2004. 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. CASIEa Very truly yours, Commissioner of Internal Revenue By: (SGD.) ESTELA V. SALES Deputy Commissioner Legal Group