DA ITAD BIR Ruling No. 055-08

July 22, 2008 DA ITAD BIR RULING NO. 055-08 Article 109 (K), National Internal Revenue Code of 1997, as amended; Article 3, Section 10, Convention on the Privileges and Immunities of the Specialized Agencies of the United Nations The World Bank 23rd Floor Taipan Office Emerald Avenue, Ortigas Center Pasig City Attention: Mr. Bert Hofman Country Director Gentlemen : This refers to your letter dated 24 June 2008, endorsed to this Office by the Department of Finance and the Department of Foreign Affairs, requesting exemption from the payment of value-added taxes on the purchase of one (1) locally-assembled motor vehicle, for the official use of The World Bank, specifically described as follows: Make: Toyota CAMRY 2.4 V AT Model Year: 2008 Color: Silver Metallic Engine Number: 2AZ-E097366 Chassis Number: MR053BK40-07025824 In reply, please be informed that Section 106 (A) (2) (c) of the National Internal Revenue Code of 1997, as amended by Republic Act No. 9337, provides, viz.: "SEC. 106. Value-added Tax on Sale of Goods or Properties. (A) Rate and Base Tax. There shall be levied, assessed and collected on every sale, barter or exchange of goods or properties, a value-added tax equivalent to ten percent (10%) of the gross selling price or gross value in money of the goods or properties sold, bartered or exchanged, such tax to be paid by the seller or transferor: Provided, That the President, upon the recommendation of the Secretary of Finance, shall, effective January 1, 2006, raise the rate of value-added tax to twelve-percent (12%), . . ." aTCADc However, Section 109 (K) of the National Internal Revenue Code of 1997, as amended, provides: "SEC. 109. Exempt Transactions. The following 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 connection thereto, Section 10, Article III of the Convention on the Privileges and Immunities of the Specialized Agencies of the United Nations (UN Convention) provides as follows: "Article III PROPERTY, FUNDS AND ASSETS 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." The aforecited provision of the UN Convention clearly requires that to be entitled to a possible remission or return of the amount of duty or tax, the subject purchase must be for official use of the specialized agency. But in lieu of remission or return of the amount of duty or tax related to the purchase for official use, a tax exemption privilege is instead granted. 1 IcCDAS Such being the case, and since the above purchase of a motor vehicle is for the official use of The World Bank, this Office is of the opinion and so holds that the herein purchase of one (1) unit 2008 Toyota Camry 2.4 V AT is exempt from value-added tax. It is hereby understood that this exemption applies only to vehicles purchased under the name of The World Bank and 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 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.) JAMES H. ROLDAN Assistant Commissioner Legal Service Footnotes 1. BIR Ruling No. ITAD-46-07 dated April 11, 2007 citing VAT Ruling No. 143-90 which revoked VAT Ruling No. 176-89. TSHcIa