DA ITAD BIR Ruling No. 064-10

June 21, 2010 DA ITAD BIR RULING NO. 064-10 Sections 106 & 108, NIRC of 1997; Article 34, Vienna Convention on Diplomatic Relations; BIR Ruling No. ITAD-318-93 Embassy of the Republic of Indonesia Office of the Education Attache Indonesian Embassy Building # 185 Salcedo Street Legaspi Village, Makati City Attention: Ms. Eni Hartati Minister Counsellor Gentlemen : This has reference to your Note Verbale No. PK/0359-B/IV/2010 dated May 6, 2010, referred to this Office by the Department of Finance (DOF) and the Office of Protocol and State Visits of the Department of Foreign Affairs (DFA), requesting exemption from payment of value-added tax (VAT) on the purchase of one (1) motor vehicle, for the official use of the Office of the Education Attach of the Embassy of the Republic of Indonesia, Philippines, specifically described as follows: Make: Toyota Camry 3.5Q A/T Year Model: 2010 Color: Xtreme Black Chassis No.: MR053KK4007002478 Engine No.: 2GR0726771 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; . . . . " (Emphasis supplied) Thus, the tax exemption privilege of an Embassy and its diplomatic agents does not include exemption from VAT, which is an indirect tax, on its local purchases of goods and services. In other words, purchases by that Embassy of goods and/or services shall, in general, be subject to the VAT prescribed under Sections 106 and 108, both of the National Internal Revenue Code of 1997 (NIRC of 1997), as amended. However, applying the principle of reciprocity, this Office may confirm the VAT exemption of the Embassy on the purchase of the said motor vehicle it appearing from the list submitted by the DFA dated March 22, 2010, that the Embassy of the Republic of Indonesia allows similar exemption to the Philippine Embassy and/or its personnel on their local purchases of motor vehicles thereat. IaHSCc Hence, the local purchase of one (1) unit 2010 Toyota Camry 3.5Q A/T for the official use of the Office of the Education Attach of the Embassy of the Republic of Indonesia is exempt from VAT on the basis of reciprocity. (BIR Ruling No. DA-ITAD-318-93 dated July 8, 1993) As for the sale made by a VAT-registered business establishment to the qualified foreign embassy, 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