DA ITAD BIR Ruling No. 074-09

August 11, 2009 DA ITAD BIR RULING NO. 074-09 Sections 106 & 108 of the National Internal Revenue Code of 1997; Article 34, Vienna Convention on Diplomatic Relations; BIR Ruling No. ITAD-67-06 Embassy of Australia 23rd Flr., Tower 2 RCBC Plaza 6819 Ayala Avenue Makati City Attention: Ms. Alexandra Louise Robinson First Secretary Gentlemen : This has reference to your Note Verbale No. 230/09 dated June 25, 2009, 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 from Mr. Yinguo Huang, Senior Consulting Services Specialist, Consulting Services Division, COCS of the Asian Development Bank (ADB) in the Philippines of one (1) locally-purchased motor vehicle (imported by local dealership), by Ms. Alexandra Louise Robinson, First Secretary of the Australian Embassy, specifically described as follows: Type of Use: Personal Make: 2002 Honda CRV License No.: X0106S00736 Chassis No.: PADRD48302V002852 Engine No.: PRL83-2002825 In reply, please be informed that Article 34 of the Vienna Convention on Diplomatic Relations reads: ADcEST "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 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 of 1997, as amended. However, applying the principle of reciprocity, this Office may confirm the VAT exemption of the Embassy of Australia and/or its personnel on their local purchase of motor vehicles it appearing from the list submitted by the DFA dated February 10, 2009, that the Government of Australia allows similar exemption to the Philippine Embassy and/or its personnel on their local purchases of motor vehicles thereat. DTAHSI Hence, since the transferor and the transferee of the subject motor vehicle are both VAT exempt individuals, the sale of one (1) unit of 2002 Honda CRV by Mr. Yinguo Huang, Senior Consulting Services Specialist, Consulting Services Division, COCS of the ADB to Ms. Alexandra Louise Robinson, First Secretary of the Australian Embassy, for her personal use continues to be exempt from VAT. (BIR Ruling No. ITAD-67-06 dated June 8, 2006) 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