DA ITAD BIR Ruling No. 061-08

August 28, 2008 DA ITAD BIR RULING NO. 061-08 Sec. 109 National Internal Revenue Code 1997 as amended by Republic Act No. 9337; Convention on the Privileges and Immunities of the UN Specialized Agencies dated 21 November 1947; BIR Ruling No. DA-ITAD-41-08 United Nations Children's Fund (UNICEF) 31st Floor, Yuchengco Tower RCBC Plaza, 6819 Ayala Avenue 1200, Makati City Attention: Mr. Anselme C. Motcho Chief of Operations Gentlemen : This refers to your letter with Reference No. MA/DFA#08-0102 dated 9 July 2008, indorsed to this Office by the Department of Finance and the Department of Foreign Affairs, requesting for the exemption from payment of value-added tax (VAT) on the local purchase of one (1) motor vehicle, for the official use of the UNICEF Field Office, Mindanao Desk-Cotabato City, specifically described as follows: CIAHaT Make: One (1) Toyota Hi Lux 4X4 3.0 Diesel M/T Model Year: 2008 Color: Lithium Engine Number: 1KD7589394 Chassis Number: MROFZ29G001553089 In reply, please be informed that Section 106 (A) of the National Internal Revenue Code of 1997, as amended by Republic Act No. 9337, provides, viz. : "Section 106. Value-added Tax on Sale of Goods or Properties . (A) Rate and Base Tax. There shall be levied, assessed and collected on every sale, barter or exchange of goods or properties, a value-added tax equivalent to ten percent (10%) of the gross selling price or gross value in money of the goods or properties sold, bartered or exchanged, such tax to be paid by the seller or transferor: Provided, That the President, upon the recommendation of the Secretary of Finance, shall, effective January 1, 2006, raise the rate of value-added tax to twelve-percent (12%), . . ." However, Section 109 (K) of the same Tax Code, as amended provides, viz. : "SEC. 109. Exempt Transactions . Subject to the provisions of Subsection (2) hereof, the following transactions shall be exempt from the value-added tax: xxx xxx xxx (K) Transactions which are exempt under international agreements to which the Philippines is a signatory or under special laws, except those under Presidential Decree No. 529;" In this connection, Section 10, Article III of the Convention on the Privileges and Immunities of the Specialized Agencies of the United Nations dated 21 November 1947 provides, viz. : "Article III PROPERTY, FUNDS AND ASSETS xxx xxx xxx Section 10. While the specialized agencies will not, as a general rule, claim exemption from excise duties and from taxes on the sale of movable and immovable property which form part of the price to be paid, nevertheless when the specialized agencies are making important purchases for official use of property on which such duties and taxes have been charged or chargeable, States parties to this Convention will, whenever possible, make appropriate administrative arrangements for the remission or return of the amount of duty or tax. (Emphasis supplied) AaSTIH With respect to the aforequoted, this Bureau has taken the position that the imposition of taxes on the important purchases for the official use of specialized agencies of the United Nations shall mean that, in lieu of the provision on the remission or refund of amount of tax due, a tax exemption privilege can be granted. (VAT Ruling No. 143-90) Thus, based on the above provision, important purchases of property for official use of the specialized agencies of the United Nations are accorded exemption from indirect taxes such as VAT imposed under Section 106 of the Tax Code of 1997. Such being the case, and since UNICEF is a specialized agency of the United Nations, this Office is of the opinion and so holds that the aforementioned purchase of one (1) unit 2008 Toyota Hi Lux 4X4 3.0 Diesel M/T for the official use of the UNICEF Field Office, Mindanao Desk Cotabato City, is exempt from VAT. (BIR Ruling No. DA-ITAD 41-2008 dated 17 June 2008) It is hereby understood that this exemption applies only to vehicles purchased under the name of the UNICEF and for its official use. 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. aCASEH (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service