DA ITAD BIR Ruling No. 057-09

May 20, 2009 DA ITAD BIR RULING NO. 057-09 Sections 106 & 108 of the National Internal Revenue Code of 1997; Article 34, Vienna Convention on Diplomatic Relations; BIR Ruling No. DA-ITAD-96-03 Embassy of Japan 2627 Roxas Boulevard Pasay City Gentlemen : This has reference to your Note Verbale No. 352-07 dated July 25, 2007 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 a refund of the taxes paid on the (1) unit of locally-purchased motor vehicle for the personal use of Mr. Kazushige Saito, Second Secretary of the Embassy of Japan, specifically described as follows: aTAEHc Make Model Color Frame Engine Year Number Number Toyota Innova G 2007 209 X. Black TGN40-5010678 1TR-6379112 Gas A/T 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; . . . ." (Underscoring supplied) Thus, the tax exemption privilege of an Embassy and its diplomatic agents does not include exemption from the value-added tax (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 both 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 Japan and/or its personnel on their local purchase of motor vehicles it appearing from the list submitted by the DFA dated February 10, 2009, that the Government of Japan allows similar exemption to the Philippine Embassy and/or its personnel on their local purchases of motor vehicles thereat. Hence, the purchase of locally-assembled one (1) unit of 2007 Toyota Innova G Gas A/T, for the personal use of Mr. Kazushige Saito, Second Secretary of the Embassy of Japan, is exempt from VAT. (BIR Ruling No. DA-ITAD-96-03 dated July 13, 2003) This ruling is issued on the basis of the facts as represented and is rendered only for the purpose of determining whether the Embassy of Japan is entitled to VAT exemption on the basis of reciprocity. 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. The determination on whether your request for tax refund should be given due course is upon the Office which will be conducting the investigation for that purpose. IHaSED Very truly yours, (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service