DA ITAD BIR Ruling No. 063-08

September 8, 2008 DA ITAD BIR RULING NO. 063-08 Article 109, National Internal Revenue Code of 1997; Cooperation Agreement Between the Government of the Republic of the Philippines and the International Organization for Migration; Convention on the Privileges and Immunities of the Specialized Agencies of the United Nations; BIR Ruling Nos. DA-ITAD-058-07 and DA-ITAD-46-07 International Organization for Migration 25th Floor, Citibank Tower Condominium 8741 Paseo de Roxas 1226 Makati City Gentlemen : This refers to your letter with Ref. No. C.1.O1.E.141 dated July 23, 2008, endorsed to this Office by the Department of Finance and the Department of Foreign Affairs, requesting the amendment of BIR Ruling No. DA-ITAD-53-08 dated 15 July 2008, confirming exemption from value-added tax (VAT) on the local purchase of one (1) motor vehicle, for the official use of the International Organization for Migration (IOM), specifically described as: TAaIDH Make: Honda CRV 4X4 A/T Model Year: 2008 Color: Sparkle Gray Engine Number: K24Z12801564 Chassis Number: MRHRE48408P020106 The amendment is requested to replace the foregoing specification of the subject vehicle to: Make: Honda CRV 2.4 4X4 A/T Model Year: 2008 Color: Sparkle Gray Engine Number: K24ZI2803897 Chassis Number: MRHRE48408P020321 In reply, please be informed that Section 109 of the National Internal Revenue Code of 1997 (NIRC), as amended by Section 7 of Republic Act No. 9337 dated 01 November 2005 provides as follows: "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, Article 3 of the Cooperation Agreement Between the Government of the Republic of the Philippines and the International Organization for Migration dated 13 March 2003, states as follows: SCEDAI "Article 3 1. The Organization shall enjoy in the Republic of the Philippines the same privileges and immunities as those granted to specialized agencies of the United Nations by virtue of the Convention on the privileges and immunities of the specialized agencies of 21 November 1947. 2. In particular, the Organization shall be exempt from all indirect taxes for purchases or articles intended for official use. (Emphasis supplied) xxx xxx xxx" This exemption should be read in relation to Section 10, Article III of the Convention on the Privileges and Immunities of the Specialized Agencies of the United Nations dated November 21, 1947 which provides: "Article III 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. xxx xxx xxx" Based on the above provisions, important purchases of goods and services in the Philippines for official use of the specialized agencies of the United Nations (UN) are accorded exemption from indirect taxes such as the VAT imposed under Section 107 of the NIRC of 1997. TDESCa This Bureau has taken the position that the aforecited provision on the non-imposition of taxes on the important purchases for IOM's official use 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. (BIR Ruling No. DA-ITAD-46-07 dated 11 April 2007 citing VAT Ruling No. 143-90 revoking VAT Ruling No. 176-89) Such being the case, and since the above purchase of a motor vehicle is for the official use of the IOM, this Office is of the opinion and so holds that the herein purchase of one (1) unit 2008 Honda CRV 2.4 4X4 A/T, engine number K24Z12803897 and with chassis number MRHRE48408P020321 is exempt from value-added tax, pursuant to Article 3 of the Cooperation Agreement Between the Government of the Republic of the Philippines and the International Organization for Migration and Section 10 of the Convention on the Privileges and Immunities of the Specialized Agencies of the United Nations . (BIR Ruling No. DA-ITAD-058-07 dated 09 May 2007) This ruling CANCELS and SUPERSEDES BIR Ruling No. DA-ITAD 53-08 dated 15 July 2008. It is hereby understood that this exemption applies only to motor vehicles purchased under the name of the International Organization for Migration 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. SAHITC Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service