Embassy of the Republic of Panama

October 16, 2018 DA ITAD BIR RULING NO. 048-18 Principle of Reciprocity; BIR Ruling No. ITAD-322-11 Embassy of the Republic of Panama 11th Floor, National Life Insurance Building 6762 Ayala Avenue, 1200 Makati City Gentlemen : This has reference to your Note E.M.P. 327/170918 dated September 18, 2018 referred to this Office by the Department of Finance and the Department of Foreign Affairs (DFA), requesting for the exemption from the payment of value-added (VAT) and ad valorem taxes on the local purchase of a motor vehicle for personal use of AAA , _______________ of the Embassy of the Republic of Panama, specifically described as follows: ASEcHI Type of Use: Personal Make: Mitsubishi Montero Sport GLS Premium 2.4D 2WD AT Model Year: 2016 Color: Pyrenese Black Frame Number: MMBGUKR10GH026594 Engine Number: 4N15UAS8863 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 Republic of Panama and/or its personnel on their local purchase of motor vehicles since it appears from the list submitted by the DFA dated February 2, 2018, that the Government of the Republic of Panama allows similar exemption to the Philippine Embassy and/or its personnel on their purchase of motor vehicles in the Republic of Panama. In view thereof, the local sale of one (1) unit of 2016 Mitsubishi Montero Sport GLS Premium 2.4D 2WD AT for personal use AAA, _______________ of the Embassy of the Republic of Panama, being an exempt individual, shall be exempt from ad valorem tax and subject to VAT at zero percent (0%) rate pursuant to Section 106 (A) (2) (b) of the NIRC of 1997, as amended. (BIR Ruling No. ITAD-322-11 dated December 19, 2011) 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