DA ITAD BIR Ruling No. 064-06

June 6, 2006 DA ITAD BIR RULING NO. 064-06 Sec 106 & 108 of the National Internal Revenue Code of 1997; Article 34, Vienna Convention Royal Norwegian Embassy 21st Floor, Petron Mega Plaza Bldg. Makati City Gentlemen : This has reference to your Note No. 18/06 dated May 23, 2006, referred to this Office by the Department of Finance (DOF) and the Office of Protocol, Department of Foreign Affairs (DFA), requesting for a tax-free purchase on a local motor vehicle for the official use of the Royal Norwegian Embassy, specifically described as follows: Make: Mitsubishi Pajero 4x4 Automatic Super Select Model Year: 2006 Color: Deep Blue Mica Engine Number: 6G75RG5826 Chassis Number: JMYLYV77W4J000985 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 goods or services; "xxx xxx xxx" Thus, the tax exemption privilege of an Embassy and its diplomatic agents does not include exemption from the value-added tax (VAT) on its local purchases of goods and services. In other words, purchases by that Embassy of goods and/or services shall be subject to the VAT prescribed under Sections 106 and 108 of the National Internal Revenue Code of 1997. However, applying the principle of reciprocity, this Office may grant exemptions to the Royal Norwegian Embassy or its personnel on their local purchases of goods and/or services it appearing from the list submitted by the Department of Foreign Affairs as of October 18, 2005 that your Government allows similar exemption to Philippine Embassy personnel on their purchases of goods and services in your country. ASHECD Hence, the herein local purchase of one (1) Mitsubishi Pajero 4x4 Automatic Super Select for the official use of the Royal Norwegian Embassy is exempt from VAT. (ITAD-Ruling No. 10-04 dated August 2, 2000) Very truly yours, (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service