DA ITAD BIR Ruling No. 052-17

December 28, 2017 DA ITAD BIR RULING NO. 052-17 Principle of Reciprocity; BIR Ruling No. ITAD-053-14 Embassy of the United States of America 1201 Roxas Boulevard Manila, Philippines 1000 Attention: AAA _______________ Gentlemen : This has reference to your Note No. 2369 dated October 30, 2017 referred to this Office by the Department of Finance (DOF) 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 three (3) units of motor vehicles for the official use of the Embassy of the United States of America, specifically described as follows: EHaASD Make and Model Model Year VIN/Chassis Number Motor/Engine No. Color TOYOTA HIACE SUPER GRANDIA 2018 JTFRT13PXH8018930 IKD2755928 White Pearl 2 Tone TOYOTA HIACE GL GRANDIA 3.0L 2018 JTFRT13P2H8018923 IKD2755904 Silver Metallic TOYOTA HIACE SUPER GRANDIA DIESEL A/T 2018 JTFRT13PXH8019463 IKD2759248 White Pearl 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 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 VAT and ad valorem tax prescribed under Sections 106 and 149 of the National Internal Revenue Code of 1997, as amended. However, applying the principle of reciprocity, this Office may confirm exemption of the Embassy of the United States of America and/or its personnel on their local purchase of motor vehicles it appearing from the list submitted by the DFA dated November 22, 2017 that the Government of the United States of America allows similar exemption to the Philippine Embassy and/or its personnel on their local purchase of motor vehicles in the United States. In view thereof, the local purchase of three (3) units Toyota Hiace for the official use of the Embassy of the United States of America is exempt from VAT and ad valorem tax. (BIR Ruling No. ITAD-053-14 dated May 15, 2014) As for the sale made by a VAT-registered business establishment to the qualified foreign embassy, it shall enjoy the benefit of zero percent (0%) VAT pursuant to Revenue Memorandum Order No. 22-2004. 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