DA ITAD BIR Ruling No. 072-06

June 20, 2006 DA ITAD BIR RULING NO. 072-06 Sec 106 & 108 of the National Internal Revenue Code of 1997; Article 34, Vienna Convention; BIR Ruling No. DA-ITAD-16-03 Embassy of Japan 2627 Roxas Boulevard Pasay City Gentlemen : This has reference to your Note No. 222-06 dated May 15, 2005, 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 personal use of Mr. Shinichi Kakui, First Secretary of the Embassy of Japan, specifically described as follows: Make: Toyota Innova G DSL AT 2.5 4S Model Year: 2006 Color: 199 Quick Silver Engine Number: 2KD-9597147 Frame Number: KUN40-5008812 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, both of the National Internal Revenue Code of 1997. However, applying the principle of reciprocity, this Office may grant exemptions to the Embassy of Japan 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. aAHSEC Hence, the herein local purchase of one (1) Toyota Innova G DSL AT 2.5 4S for the personal use of Mr. Shinichi Kakui of the Embassy of Japan is exempt from VAT. (BIR Ruling No. DA-ITAD-16-03 dated July 16, 2003) Very truly yours, (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service