DA ITAD BIR Ruling No. 074-07

June 4, 2007 DA ITAD BIR RULING NO. 074-07 Sections 106 & 108 of the National Internal Revenue Code of 1997; Article 34, Vienna Convention; BIR Ruling No. DA-322-97 Royal Embassy of Saudi Arabia No. 389 Sen. Gil J. Puyat Avenue Ext. Makati City Attention: H.E. Mohammed Ameen Wali Ambassador Extraordinary and Plenipotentiary Gentlemen : This has reference to your Note Verbale No. DFA/1428H/059 dated April 26, 2007, 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 Embassy of Saudi Arabia, specifically described as follows: cIEHAC Make: Toyota Fortuner G 2.7L VVT Model Year: 2007 Color: Xtreme Black Engine Number: 2TR-8035107 VIN Number: MR0ZX69G000011088 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 exemptions 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, in general, 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 confirm the exemptions to the Royal Embassy of Saudi Arabia or its personnel on their local purchase of motor vehicles 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 and/or its personnel on their purchases of locally-assembled motor vehicles thereat. Hence, the herein local purchase of one (1) unit of 2007 Toyota Fortuner G2.7L VVT for the official use of the Royal Embassy of Saudi Arabia is exempt from VAT. (DA-322-97 dated September 24, 1997) 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. DcAEIS Very truly yours, (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service