Embassy of Japan

December 16, 2019 DA ITAD BIR RULING NO. 049-19 Principle of Reciprocity; BIR Ruling No. ITAD-313-11 Embassy of Japan 2627 Roxas Boulevard Pasay City Gentlemen : This has reference to your Note No. 602-19 dated November 15, 2019 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 official use of the Embassy of Japan, specifically described as follows: Type of Use: Official Make: Toyota Camry 2.5 G A/T Model Year: 2020 Color: Attitude Black Mica Frame Number: MR2BF3HK9K4006933 Engine Number: 2AR2275322 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 Embassy of Japan and/or its personnel on their local purchase of motor vehicles since it appears from the list submitted by the DFA dated December 5, 2019 that the Government of Japan allows similar exemption to the Philippine Embassy and/or its personnel on their purchase of motor vehicles in Japan. In view thereof, the local sale of one (1) unit of 2020 Toyota Camry 2.5 G A/T for the official use of the Embassy of Japan, an exempt entity, shall 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