DA ITAD BIR Ruling No. 057-07

April 30, 2007 DA ITAD BIR RULING NO. 057-07 Secs. 106 & 108 of the National Internal Revenue Code of 1997; Article 34 of the Vienna Convention; BIR Ruling No. DA-ITAD-013-00 Embassy of the United States of America (USAID-Millennium Challenge Account-Philippine Threshold Program-MCA-PTP) Unit 2302, 23rd Floor Corporate Center 141 Valero Street, Salcedo Village 1227 Makati City Attention: Mr. James King Chief of Party, Management System International Millennium Challenge Account Philippine Threshold Plan Project Gentlemen : This has reference to your Note Verbale No. 0375 dated March 26, 2007 referred to this Office by the Department of Foreign Affairs (DFA), requesting for a tax-free purchase of three (3) locally assembled motor vehicles described hereunder for official use by the USAID of the Embassy of the United States of America: Make Model Year Color Chassis Engine Number Number Ford Escape XLS 2007 Panther PE2EV22171G L3018214 2.3L 4X2 A/T Black F00106 Ford Escape XLS 2007 Magnetic PE2EV22171G L3006036 2.3L 4X2 A/T Silver F00063 Ford Everest XLS 2007 Highlight MNCLS4D107 WLAT773650 2.5L 4X2 A/T Silver W200839 In reply, please be informed that Article 34 of the Vienna Convention on Diplomatic Relations reads: "Article 34 "Subsidiary arrangements "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 the value-added tax (VAT) 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 value-added tax prescribed under Sections 106 and 108, both of the National Internal Revenue Code of 1997. However, applying the principle of reciprocity, this Office may confirm exemptions to the Embassy of the United States of America and/or its personnel on their local purchases of goods and/or services it appearing from the list submitted by the Department of Foreign Affairs that your Government allows similar exemption to Philippine Embassy and/or its personnel on their purchases of goods and services in your Country. HacADE Hence, the herein local purchases of two (2) units of 2007 Ford Escape and one (1) unit 2007 Ford Everest for the official use of USAID of the Embassy of the United States of America are exempt from VAT and ad valorem taxes. (BIR Ruling No. DA-ITAD-13-00 dated January 24, 2000) 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 party is concerned. Very truly yours, (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service