DA ITAD BIR Ruling No. 052-06

May 11, 2006 DA ITAD BIR RULING NO. 052-06 Sec 109 - National Internal Revenue Code 1997; Article III, Section 10 - Vienna Convention on the Privileges and Immunities of the Specialized Agencies of the United Nations; BIR Ruling No. DA-ITAD-01-04 United Nations Fund for Population Activities (UNFPA) 30th Floor, Yuchengco Tower RCBC Plaza, 6819 Ayala Avenue Makati City Gentlemen : This refers to your letter dated April 11, 2006, indorsed 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) on the purchase of eleven (11) locally-produced motorcycles, for the official use of the United Nations Fund For Population Activities (UNFPA), specifically described as follows: Make: Eleven (11) Kawasaki Motorcycles Model Year: 2006 Color: (5) Five Black/(6) Six Red Engine Number: QS157FMI-2*0505501750 / QS157FMI-2*0505501751 QS157FMI-2*0505501762 / QS157FMI-2*0505501761 QS157FMI-2*0505501753 / QS157FMI-2*0505501797 QS157FMI-2*0505501802 / QS157FMI-2*0505501796 QS157FMI-2*0505501725 / QS157FMI-2*0505501690 QS157FMI-2*0505501695 Chassis Number: NF41K-101735 / NF41K-101736 / NF41K-101737 NF41K-101738 / NF41K-101739 / NF41K-101793 NF41K-101794 / NF41K-101795 / NF41K-101796 NF41K-101797 / NF41K-101798 In reply, please be informed that Section 109 of the National Internal Revenue Code of 1997 (NIRC), as amended by Section 7 of Republic Act No. 9337 dated November 1, 2005 , provides as follows: "SEC. 109. Exempt Transactions . Subject to the provisions of Subsection (2) hereof, the following transactions shall be exempt from the value-added tax: xxx xxx xxx (K) Transactions which are exempt under international agreements to which the Philippines is a signatory or under special laws, except those under Presidential Decree No. 529;" In relation thereto, Section 10, Article III of the Convention on the Privileges and Immunities of the Specialized Agencies of the United Nations dated November 21, 1947 provides: "Article III xxx xxx xxx Section 10 While the specialized agencies will not, as a general rule, claim exemption from excise duties and from taxes on the sale of movable and immovable property which form part of the price to be paid, nevertheless when the specialized agencies are making important purchases for official use of property on which such duties and taxes have been charged or chargeable, States parties to this Convention will, whenever possible, make appropriate administrative arrangements for the remission or return of the amount of duty or tax. aTHCSE xxx xxx xxx" Based on the above provisions, important purchases of goods and service in the Philippines for official use of the specialized agencies of the United Nations (UN) are accorded exemption from indirect taxes such as the VAT imposed under Section 107 of the NIRC. Such being the case, and since the UNFPA is a specialized agency of the UN, this Office is of the opinion and so holds that aforementioned purchases of eleven (11) units 2006 Kawasaki Motorcycles for the official use of the UNFPA, is exempt from VAT. It is hereby understood that this exemption applies only to vehicles purchased under the name of United Nations Fund for Population Activities for its official use. This ruling is issued on the basis of the facts as represented. However, if upon investigation it shall be disclosed that the 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.) JAMES H. ROLDAN Assistant Commissioner Legal Service