DA ITAD BIR Ruling No. 058-13

December 9, 2013 DA ITAD BIR RULING NO. 058-13 Principle of Reciprocity; BIR Ruling No. ITAD-300-11 Australian Embassy Level 23-Tower 2 RCBC Plaza 6819 Ayala Avenue Makati City 1200 Gentlemen : This has reference to your Note No. 371/13 dated October 30, 2013 referred to this Office by the Department of Finance (DOF) and the Department of Foreign Affairs (DFA), requesting for the exemption from the payment of value-added tax (VAT) on the local purchase of a motor vehicle for the official use of the Embassy of Australia, specifically described as follows: Type of Use: Official Make: Toyota Fortuner 4x2 G GAS AT Model Year: 2014 Color: Freedom White Frame Number: MHFZX69G007057493 Engine Number: 2TR-7629458 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: cEaDTA (a) indirect taxes of a kind which are normally incorporated in the price of the goods and services; xxx xxx xxx" Thus, the tax exemption privilege of an Embassy and its diplomatic agents does not include exemption from 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 of the National Internal Revenue Code of 1997, as amended. However, applying the principle of reciprocity, this Office may confirm exemption of the Embassy of Australia and/or its personnel on their local purchase of motor vehicles it appearing from the list submitted by the DFA dated July 23, 2013 that the Government of Australia allows similar exemption to the Philippine Embassy and/or its personnel on their purchase of motor vehicles in Australia. In view thereof, the local purchase of one (1) unit of 2014 Toyota Fortuner 4x2 G GAS AT for the official use of the Embassy of Australia, being an entity exempt from VAT, shall be subject to VAT at zero-percent (0%) rate pursuant to Section 106 (A) (2) (c) of the NIRC of 1997 as amended. (BIR Ruling No. ITAD-300-11 dated December 1, 2011) 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.) ESTELA V. SALES Deputy Commissioner Legal Group