DA ITAD BIR Ruling No. 057-08

July 30, 2008 DA ITAD BIR RULING NO. 057-08 Sections 106, 108 & 149 of the National Internal Revenue Code of 1997; Article 34, Vienna Convention on Diplomatic Relations; BIR Ruling No. ITAD-34-99 Embassy of the United States of America 1201 Roxas Boulevard Ermita 1000 Manila Gentlemen : This has reference to your Note Verbale No. 0799 dated June 25, 2008, referred to this Office by the Department of Finance (DOF) and the Office of Protocol and State Visits of the Department of Foreign Affairs (DFA), requesting for a tax-free purchase of a locally-assembled motor vehicle for the official use of the Embassy of the United States of America, specifically described as follows: Make: Ford Escape XLT 2.3L 4X4 A/T Model Year: 2008 Color: Panther Black Engine Number: L310360914 VIN Number: PE2EV66181GG00265 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 goods or services; DCcTHa "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 VAT prescribed under Sections 106 and 108, and ad valorem tax under Section 149, all of the National Internal Revenue Code of 1997, as amended. However, applying the principle of reciprocity, this Office may confirm the VAT exemption of the Embassy of the United States of America and/or its personnel on their purchase of locally assembled motor vehicles it appearing from the list submitted by the Department of Foreign Affairs as of January 25, 2008 that the Government of the United States of America allows similar exemption to Philippine Embassy and/or its personnel on their purchases of locally-assembled motor vehicles thereat. Hence, the herein local purchase of one (1) unit of 2008 Ford Escape XLT 2.3L 4X4 A/T for the official use of the Embassy of the United States of America is exempt from VAT and ad valorem tax. (BIR Ruling No. DA-ITAD-34-99 dated October 18, 1999) 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.) JAMES H. ROLDAN Assistant Commissioner Legal Service