DA ITAD BIR Ruling No. 055-10

June 2, 2010 DA ITAD BIR RULING NO. 055-10 Sections 106 and 108, NIRC of 1997, as amended; Article 34, Vienna Convention on Diplomatic Relations; BIR Ruling No. DA-ITAD-087-07 Delegation of the European Commission in the Philippines 30th Floor, Tower 2, RCBC Plaza 6819 Ayala Avenue 1200, Makati City Attention: Ms. Camilla Hagstrom Second Secretary Gentlemen : This has reference to your Note No. 10/027 dated March 9, 2010 referred to this Office by the Department of Finance and the Department of Foreign Affairs (DFA), requesting for the exemption from payment of value-added tax (VAT) on the purchase of a second-hand, previously tax-exempted motor vehicle for the personal use of Ms. Camilla Hagstrom, Second Secretary of the Delegation of the European Commission Ms. Jacqueline E. Gillain, Attach of the same Embassy, specifically described as follows: Make: Toyota Prado Model Year: 2005 Color: GX8 Petro/Silver Chassis Number: JTEBL29J455012066 Motor Number : 0129053 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." (Emphasis supplied) Thus, the tax exemption privilege of an Embassy and its diplomatic agents does not include exemption from VAT, which is an indirect 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 prescribed under Sections 106 and 108 of the National Internal Revenue Code of 1997 (NIRC of 1997) as amended. CcSEIH However, applying the principle of reciprocity, this Office may confirm entitlement to VAT exemption of an Embassy and/or its personnel on their purchase of locally-assembled motor vehicles if it appears from the list submitted by the DFA that the Government of such Embassy or personnel allows similar exemption to Philippine Embassy personnel on their local purchases of motor vehicles in their country. In the case of the Delegation of the European Commission, reciprocity is extended only to those diplomatic officials whose country of origin have diplomatic relations and accord the same rights and diplomatic privileges and immunities to the Mission of the Republic of the Philippines in their countries. Inasmuch as Ms. Camilla Hagstrom of the EU is a Swedish national whose country of origin does not appear in the 22 March 2010 list, we are constrained to DENY the request for VAT exemption for lack of legal basis. 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, (SGD.) MARISSA O. CABREROS OIC-Assistant Commissioner Legal Service