DA ITAD BIR Ruling No. 051-17

December 20, 2017 DA ITAD BIR RULING NO. 051-17 Principle of Reciprocity; BIR Ruling No. ITAD-127-16 Embassy of Romania 6th Floor G.C. Corporate Plaza 150 Street, Legaspi Village Gentlemen : This has reference to your Note No. 613 dated 04 December 2017 referred to this Office by the Department of Finance (DOF) and the Department of Foreign Affairs (DFA), requesting for the exemption from payment of value-added tax (VAT) and ad valorem tax on the local purchase of a motor vehicle for the official use of the Embassy of Romania, specifically described as follows: aICcHA Type of Use: Official Make: Mazda 3 Sedan 1.5 A/T Model Year: 2018 Color: Titanium Flash Frame Number: JM7BN12 A0J1183844 Engine Number: P520473870 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 VAT on their local purchase of goods and services. In other words, purchases by that Embassy or its agents of goods and services, including purchases of motor vehicle, shall, in general, be subject to VAT and ad valorem tax under Sections 106 and 149 of the National Internal Revenue Code (NIRC) of 1997, as amended, respectively. However, applying the principle of reciprocity, this Office may confirm exemption of the Embassy of Romania and/or its personnel on their local purchase of motor vehicles. To date, while the Philippines has no diplomatic post in Romania, there is the Philippine Embassy in Budapest, Hungary, which has concurrent jurisdiction over Romania. The Embassy of Hungary is included in the updated list of diplomatic missions entitled to VAT exemption in the Philippines as confirmed from the list submitted by the DFA dated 22 November 2017, and per DFA's 1st Indorsement dated 24 March 2017 that the Government of Romania allows similar exemption to the Philippine Embassy and/or its personnel on their purchase of motor vehicles in Romania. In view thereof, the local sale of one (1) unit 2018 Mazda 3 Sedan 1.5 A/T for the official use of the Embassy of Romania, being an exempt entity, shall be subject to VAT at zero percent (0%) rate and exempted from ad valorem tax pursuant to Section 106 (A) (2) (c) of the NIRC of 1997, as amended. (BIR Ruling No. ITAD-127-16 dated 8 August 2016) 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.) MARISSA O. CABREROS Assistant Commissioner Legal Service