DA ITAD BIR Ruling No. 046-06

April 26, 2006 DA ITAD BIR RULING NO. 046-06 Sec 106 & 108, Sec 149 of the Tax Code 1997; Article 34, Vienna Convention on Diplomatic Relations; BIR Ruling No. ITAD-038-05 Royal Netherlands Embassy 9th Floor, King's Court Building 2129 Don Chino Roces Ave. Makati City Gentlemen : This has reference to your Note No. MAN/CZ/019 dated February 6, 2006 referred to this Office by the Department of Finance (DOF) and the Department of Foreign Affairs (DFA), requesting exemption from the payment of value-added tax (VAT) and ad valorem tax on the purchase of one (1) locally-assembled motor vehicle, for the official use of the Royal Netherlands Embassy, specifically described as follows: Make: Motorstar Motorcycle Easyride 150-3 Model Year: 2005 Color: Maroon/Silver Engine Number: BZ157QMJ0503M008 Chassis Number: LD5TCKPA951000047 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 goods or services; xxx xxx xxx" Thus, the tax exemption privilege of an Embassy and/or its diplomatic agents does not include exemption from the VAT and ad valorem tax on its local purchases of goods and services. In other words, purchases by that Embassy of goods and/or services shall be subject to the value-added tax prescribed under Sections 106 and 108, and ad valorem taxes under Section 149, all of the National Internal Revenue Code of 1997. ADSTCa However, applying the principle of reciprocity, this Office may grant VAT exemption to the Royal Netherlands Embassy and/or its personnel on their local purchases of goods and/or services it appearing from the list submitted by the Department of Foreign Affairs as of October 18, 2005, that your Government allows similar exemption to Philippine Embassy and/or its personnel on their purchases of goods and services in your country. Hence, the local purchase of one (1) unit of 2005 Motorstar Motorcycle Easyride 150-3 for the official use of the Royal Netherlands Embassy is exempt from ad valorem and value-added taxes. This ruling is issued on the basis of the facts as represented. However, if upon investigation it shall be disclosed that the facts are different, then this ruling shall be without force and effect insofar as the herein parties are concerned. Very truly yours, (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service