Embassy of the Lao People's Democratic Republic

December 2, 2019 DA ITAD BIR RULING NO. 046-19 Principle of Reciprocity; BIR Ruling No. ITAD-246-15 Embassy of the Lao People's Democratic Republic 34 Lapu-Lapu Street, Magallanes Village Makati City Gentlemen : This has reference to your Note No. 075/ALM.19 dated October 23, 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 AAA , _______________ of the Embassy of the Lao People's Democratic Republic, of a previously owned and tax-exempt motor vehicle for personal use of BBB , _______________ of the same Embassy, specifically described as follows: Make Model Color Chassis Number Engine Number Plate Number Toyota Innova G 2.0 2010 Bronze Mica Metallic TGN 405019010 1TR 6792053 __________ 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 Lao People's Democratic Republic 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 Lao People's Democratic Republic allows similar exemption to the Philippine Embassy and/or its personnel on their purchase of motor vehicles in Lao People's Democratic Republic. Hence, since the transferor and the transferee of the subject motor vehicle are exempt individuals, the sale of one (1) unit of 2010 Toyota Innova G 2.0 by AAA to BBB, 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