DA ITAD BIR Ruling No. 065-10

June 21, 2010 DA ITAD BIR RULING NO. 065-10 Sections 106, 107 & 108 of the National Internal Revenue Code of 1997, as amended; Article 34, Vienna Convention on Diplomatic Relations; BIR Ruling No. DA-ITAD-012-06 The People's Bureau of the Great Socialist People's Libyan Arab Jamahiriya 2056 Lumbang corner Caballero Sts. Dasmarias Village, Makati City Gentlemen : This has reference to your Note Verbale No. 053/2010 dated May 20, 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 for a tax-free purchase of a motor vehicle for the official use of the People's Bureau of the Great Socialist People's Libyan Arab Jamahiriya, specifically described as follows: Make: Toyota Fortuner 4X2 G Gas A/T Model Year: 2010 Color: Freedom White Engine Number: 2TR6900496 Chassis Number: MR0ZX69G500024401 In reply to your request, 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." (Emphasis supplied) Thus, the tax exemption privilege of an Embassy and its diplomatic agents does not include exemption from the value-added tax (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 (NIRC) of 1997, as amended. However, applying the principle of reciprocity, this Office may confirm the VAT exemption of the People's Bureau of the Great Socialist People's Libyan Arab Jamahiriya and/or its personnel on their local purchase of imported motor vehicles it appearing from the list submitted by the DFA dated March 22, 2010, that the Government of Libya allows similar exemption to the Philippine Embassy and/or its personnel on their purchases of imported motor vehicles thereat. aCSHDI Hence, the local purchase of one (1) unit of 2010 Toyota Fortuner 4X2 G Diesel A/T for the official use of the People's Bureau of the Great Socialist People's Libyan Arab Jamahiriya is exempt from VAT. (BIR Ruling No. DA-ITAD-012-06 dated February 16, 2006) 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