DA ITAD BIR Ruling No. 061-14

June 30, 2014 DA ITAD BIR RULING NO. 061-14 Sec. 106 (A) (2) (c), 1997 NIRC, as amended; Article I, Section 1 (ii) (a), Article III Section 10, Convention on the Privileges and Immunities of the Specialized Agencies of the United Nations; BIR Ruling No. ITAD-054-10 International Labour Organization 19F, Yuchengco Tower, RCBC Plaza 6819 Ayala Avenue, Makati City Attention: Lawrence Jeff Johnson Director Gentlemen : This refers to your letter dated May 30, 2014 indorsed to this Office by the Department of Finance (DOF) and the Department of Foreign Affairs (DFA), requesting exemption from value-added tax (VAT) on the local purchase of two (2) units of motor vehicle for the official use of the International Labour Organization (ILO), specifically described as follows: Make Model Color Chassis No. Engine No. Toyota Hi-Lux 4x4G MT 2014 Freedom MR0FZ29G602543757 1KD-A463236 White Toyota Hi-Lux 4x4G MT 2014 Freedom MR0FZ29G402543353 1KD-A460192 White In reply, please be informed that Article III, Section 10 of the Convention on the Privileges and Immunities of the Specialized Agencies of the United Nations (UN Convention) , states that: "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 from the remission or return of the amount of duty or tax." IADCES In connection thereto, Article I, Section 1 (ii) (a) of the same Convention provides, as follows: "Article I Definition and Scope "Section 1. In this Convention : (ii) The words "specialized agencies" mean: xxx xxx xxx (a) The International Labour Organization; . . ." The aforecited provision of the UN Convention clearly requires that to be entitled to a possible remission or return of the amount of duty or tax, the subject purchase must be for official use the UN specialized agency, ILO in the instant case. But in lieu of remission or return of the amount of duty or tax related to the purchase for official use, a tax exemption privilege is instead granted. 1 Moreover, pursuant to Section 106 (A) (2) (c) of the 1997 NIRC, sales of goods by VAT-registered sellers to persons or entities whose exemption under special laws or international agreements to which the Philippines is a signatory effectively subjects such sales to zero rate are subject to VAT at zero percent (0%) rate, thus: "SEC. 106. Value-Added Tax on Sale of Goods or Properties. (A) Rate and Base of Tax. There shall be levied, assessed and collected on every sale, barter or exchange of goods or properties, 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, . . . xxx xxx xxx (2) The following sales by VAT-registered persons shall be subject to zero percent (0%) rate: xxx xxx xxx (c) Sales to persons or entities whose exemption under special laws or international agreements to which the Philippines is a signatory effectively subjects such sales to zero rate." EHTADa In view thereof, this Office is of the opinion as it hereby holds that the sale of two (2) units 2014 Toyota Hi-Lux 4x4G MT by the VAT-registered local car dealer to ILO, for its official use, shall be subject to VAT at zero-percent (0%) rate pursuant to Section 106 (A) (2) (c) of the 1997 NIRC, as amended. (BIR Ruling No. ITAD-054-10 dated October 18, 2010) 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.) MARISSA O. CABREROS Assistant Commissioner Legal Service Footnotes 1. BIR Ruling No. ITAD-46-07 dated 11 April 2007 citing VAT Ruling No. 143-90 which revoked VAT Ruling No. 176-89.