DA ITAD BIR Ruling No. 062-13

December 19, 2013 DA ITAD BIR RULING NO. 062-13 Sec. 106 (A) (2) (c), 1997 NIRC, as amended; Article IV, Sections 11 and 12, WHO-PH Agreement; BIR Ruling No. ITAD-103-12 World Health Organization Regional Office for the Western Pacific United Nations Avenue P.O. Box 2932, 1000 Manila Attention: Shin Young-soo Regional Director Gentlemen : This refers to your letter dated November 21, 2013 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 one (1) unit of motor vehicle, for the official use of the World Health Organization (WHO), specifically described as follows: Make: Toyota Hi-Lux 4x4 G DSL M/T Model Year: 2014 Color: Lithium Engine Number: 1KDA285299 Chassis Number: MR0FZ29G202524221 In reply, please be informed of Sections 11 & 12, Article IV of the Agreement between the World Health Organization and the Government of the Republic of the Philippines 1 (WHO-PH Agreement) , which provides: "Article IV Property, Funds and Assets xxx xxx xxx Section 11. The Organization, its assets, income and other property, shall be: (a) exempt from all direct and indirect taxes. It is understood, however, that the Organization will not claim exemption from taxes which are, in fact, no more than charges for public utility services; (b) exempt from customs duties, prohibitions and restrictions on imports and exports in respect of medical supplies, or any other goods or articles imported or exported by the Organization for its official use. It is understood, however, that such medical supplies, goods or articles, imported under such exemption will not be sold in the Republic of the Philippines except under conditions agreed with the Republic of the Philippines; (c) exempt from customs duties, prohibitions and restrictions on imports and exports in respect of their publications. . . ." HAcaCS Section 12. While the Organization will not, as a general rule, in case of minor purchases, claim exemption from excise duties, and from taxes on the movable and immovable property which form part of the price to be paid, nevertheless when the Organization is making important purchases for official use of property on which such duties and taxes have been charged or are chargeable, the Government of the Republic of the Philippines shall make appropriate administrative arrangements for the remission or return of duty or tax." The aforecited provision of the Agreement 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 of the World Health Organization. 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. 2 In relation thereto, Section 109 (1) (K) of the 1997 National Internal Revenue Code (NIRC), as amended, provides as follows: "SEC. 109. Exempt Transactions . (1) 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;" Furthermore, 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 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, cASEDC 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." Accordingly, the sale of one (1) unit 2014 Toyota Hi-Lux 4x4 G DSL M/T by the VAT-registered local car dealer for the official use of WHO, an exempt entity pursuant to the WHO-PH Agreement and Section 109 (K) of the 1997 NIRC, as amended, 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-103-12 dated February 22, 2012 ) 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 Footnotes 1. Signed on July 22, 1951. 2. BIR Ruling No. ITAD-46-07 dated 11 April 2007 citing VAT Ruling No. 143-90 which revoked VAT Ruling No. 176-89.