DA ITAD BIR Ruling No. 061-10

June 16, 2010 DA ITAD BIR RULING NO. 061-10 Sections 106 & 108, 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 Attention: Mr. Motohiko Kato Minister Gentlemen : This has reference to your Note Verbale No. 158-10 dated March 26, 2010, referred to this Office by the Department of Finance and the Office of Protocol and State Visits of the Department of Foreign Affairs (DFA), requesting the issuance of a BIR Ruling regarding VAT exemption on the local purchase of one (1) unit motor vehicle for the personal use of Mr. Motohiko Kato, Minister and Deputy Chief of Mission of the Embassy of Japan, specifically described as follows: Make: Honda CRV Year Model: 2010 Color: Sparkle Gray Frame No.: MRHRE1830AP020070 Engine No.: R20A14800069 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 the goods and services; xxx xxx xxx." (Emphasis supplied) Thus, 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 and its diplomatic agents of goods and/or services shall be subject to VAT prescribed under Sections 106 and 108 of the National Internal Revenue Code of 1997, as amended (Tax Code of 1997). However, applying the principle of reciprocity, this Office may grant exemption to the Embassy of Japan and/or its personnel on their local purchases of motor vehicles it appearing from the list submitted by the Department of Foreign Affairs as of March 22, 2010 that the Government of Japan allows similar exemption to the Philippine Embassy and its personnel on their purchases of motor vehicles in Japan. EAISDH Hence, the herein local purchase of one (1) unit of 2010 Honda CRV, for the personal use Mr. Motohiko Kato, Minister and Deputy Chief of Mission of the Embassy of Japan, is exempt from VAT. (BIR Ruling No. DA-ITAD-96-03 dated July 16, 2003) As for the sale made by a VAT-registered business establishment to the qualified foreign embassy personnel, it shall enjoy the benefit of zero percent (0%) VAT pursuant to Revenue Memorandum Order No. 22-2004. 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.) MARISSA O. CABREROS OIC-Assistant Commissioner Legal Service