DA ITAD BIR Ruling No. 067-09

June 24, 2009 DA ITAD BIR RULING NO. 067-09 Section 109 (K), NIRC of 1997; Section 10, Article III of the Convention on the Privileges and Immunities of the Specialized Agencies of the United Nations; Section 9 of the Articles of Agreement of the International Finance Corporation; BIR Ruling No. DA-ITAD-164-03; VAT Ruling No. 143-90 International Finance Corporation 11th Floor, Tower 1, Ayala Triangle Ayala Avenue, Makati City Attention: Mr. Jesse O. Ang Resident Representative Gentlemen : This has reference to your letter dated 11 May 2009 referred to this Office by the Department of Finance (DOF) and the Office of Protocol & State Visits of the Department of Foreign Affairs (DFA), requesting for a tax-free local purchase of one (1) motor vehicle, for the official use of the International Finance Corporation (IFC), specifically described as follows: HcDATC Make: Toyota Camry 2.4 V A/T Model year: 2009 Color: Thermalyte Chassis No.: MR053BK4007032584 Engine No.: 2AZE127592 It is represented that the IFC is a member of the World Bank Group; that it is a fully accredited diplomatic organization with the Department of Foreign Affairs; that it is a specialized agency of the United Nations and is immune from taxation pursuant to Section 9 (a), Article VI of the IFC Articles of Agreement. In reply, please be informed that Section 109 (K) of the National Internal Revenue Code of 1997, as amended (NIRC of 1997), provides, viz. : "Exempt transactions The following 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 Decrees No. 529. xxx xxx xxx" Relative thereto, Section 10, Article III of the Convention on the Privileges and Immunities of the Specialized Agencies of the United Nations dated 21 November 1947 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, State parties to this Convention will, whenever possible, make appropriate administrative arrangements for the remission or return of the amount of duty or tax." HCacDE This Bureau has taken the position that the aforecited provision on the imposition of taxes on the important purchases for IFC'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. (VAT Ruling No. 143-90 revoking VAT Ruling No. 176-89) Thus, based on the above provision, important purchases of property for official use of the specialized agencies of the United Nations are accorded exemption from indirect taxes such as the value-added tax (VAT) imposed under Section 106 of the NIRC of 1997. Moreover, there is the IFC Articles of Agreement which is officially recognized by the Government of the Republic of the Philippines. Its Article VI provides, viz. : "Article VI Status, Immunities and Privileges SEC. 1. Purposes of Article. To enable the corporation to fulfill the functions with which it is entrusted, the status, immunities and privileges set forth in this Article shall be accorded to the corporation in the territories of each member. SEC. 2. Status of the Corporation. The Corporation shall possess full juridical personality and, in particular, the capacity: (i) to contract; (ii) to acquire and dispose of immovable and movable property; HTCaAD (iii) to institute legal proceedings. xxx xxx xxx SEC. 9. Immunities From Taxation. (a) The Corporation, its assets, property, income and its operations and transactions authorized by this Agreement, shall be immune from taxation and from all customs duties. The Corporation shall also be immune from liability for the collection or payment of any tax or duty. (Emphasis supplied) xxx xxx xxx" Such being the case, and since IFC is a specialized agency of the United Nations, this Office is of the opinion and so holds that aforementioned purchase of one (1) unit 2009 Toyota Camry 2.4V A/T, is exempt from VAT pursuant to Section 109 (K) of the Tax Code of 1997, as amended. (BIR Ruling No. DA-ITAD-164-03 dated 07 November 2003) DCSTAH It is hereby understood that this exemption applies only to vehicles purchased under the name of the IFC 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. Very truly yours, (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service