DA ITAD BIR Ruling No. 049-06

May 5, 2006 DA ITAD BIR RULING NO. 049-06 Sec 106, 108 & 149 of the National Internal Revenue Code of 1997; Article 34, Vienna Convention; BIR Ruling No. ITAD-70-03 Embassy of the Russian Federation 1245 Acacia Road, Dasmarias Village Makati City Gentlemen : This has reference to your Note No. 49 dated April 7, 2006, referred to this Office by the Department of Finance (DOF) and the Department of Foreign Affairs (DFA), Office of Protocol, requesting for the exemption from payment of value-added tax (VAT) and ad valorem taxes on the local purchases of six (6) units of motor vehicle for the official use of the Embassy of the Russian Federation, specifically described as follows: Make And Model Color Frame/Chassis No. Motor/Engine No. 1. 2006 Toyota Night Mist ZZE121-9004179 1ZZ-4532421 Corolla Altis 1.8 G A/T 2. 2006 Mitsubishi Silver/Gray Serial No: 4G64A041775 L400 SpaceGear W5045635 Gas A/T 3. 2006 Toyota Flaxen ZZE121-8019116 3ZZ-4552317 Corolla Altis 1.6 E A/T 4. 2006 Toyota Quick Silver ZZE121-8019119 3ZZ-4552322 Corolla Altis 1.6 E A/T 5. 2006 Toyota Flaxen ZZE121-8019088 3ZZ-4546368 Corolla 1.6 E A/T 6. 2006 Toyota Quick Silver MCV30-4500508 1MZ-1837961 Camry 3.0 V V6 A/T 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 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, in general 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. However, applying the principle of reciprocity, this Office may grant exemptions to the Embassy of the Russian Federation 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 personnel on their purchases of goods and services in your country. Hence, the local purchases of six (6) units of motor vehicle for the official use of the Embassy of the Russian Federation are exempt from VAT and ad valorem taxes. (BIR Ruling No. ITAD-70-03 dated May 6, 2003) Very truly yours, (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service