DA ITAD BIR Ruling No. 047-09

April 21, 2009 DA ITAD BIR RULING NO. 047-09 Sections 106 & 108 of the National Internal Revenue Code of 1997; Article 34, Vienna Convention on Diplomatic Relations; BIR Ruling No. DA-ITAD-96-03 Embassy of Japan 2627 Roxas Boulevard Pasay City Gentlemen : This has reference to your Note Verbale No. 391-08 dated August 29, 2008 referred to this Office by the Department of Finance (DOF) and the Office of Protocol and State Visits of the Department of Foreign Affairs (DFA), requesting for a tax-free purchase of one (1) unit of locally-purchased motor vehicle for the personal use of Mr. Shigehiro Matsuda, Third Secretary of the Embassy of Japan, specifically described as follows: SCaDAE Make Model Color Frame Number Engine Number Year Honda City 1.3 S 2008 Alabaster PADCD66308V404954 REGD53- CVT 8404939 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 ; . . . ." (Underscoring supplied). Thus, the tax exemption privilege of an Embassy and its diplomatic agents does not include exemption from the value-added tax (VAT); which is an indirect tax, 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, both of the National Internal Revenue Code of 1997, as amended. However, applying the principle of reciprocity, this Office may confirm the VAT exemption of the Embassy of Japan and/or its personnel on their local purchase of motor vehicles it appearing from the list submitted by the DFA dated February 10, 2009, that the Government of Australia allows similar exemption to the Philippine Embassy and/or its personnel on their local purchases of motor vehicles thereat. Hence, the herein purchase of locally-assembled one (1) unit of 2007 Toyota Innova G Gas A/T, for the personal use of Mr. Shigero Matsuda, Third Secretary of the Embassy of Japan, is exempt from VAT. (BIR Ruling No. DA-ITAD-96-03 dated July 13, 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. HDCTAc Very truly yours, (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service