DA ITAD BIR Ruling No. 077-09

August 20, 2009 DA ITAD BIR RULING NO. 077-09 Sections 106 & 108 of the National Internal Revenue Code of 1997; Article 34, Vienna Convention on Diplomatic Relations; BIR Ruling No. ITAD-67-06 New Zealand Embassy 23rd Floor, BPI Buendia Center (Formerly Far East Bank Center) Sen. Gil Puyat Avenue Makati City Attention: H.E. Andrew Matheson Ambassador Gentlemen : This has reference to your Note Verbale No. 50-2009 dated July 1, 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 of a previously tax-exempt motor vehicle from Group Captain Mary Elizabeth Cox, Defence Attache of the New Zealand Embassy in the Philippines by H.E. Andrew Matheson, Ambassador of the same embassy, specifically described as follows: Type of Use: Personal Make: 2001 Honda CRV 2.0 A/T Color: Heather Mist Silver Chassis No.: PADRD 1830YV207379 Engine No.: PEWD7-Y307405 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 : cIACaT (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 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 New Zealand Embassy 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 New Zealand allows similar exemption to the Philippine Embassy and/or its personnel on their local purchases of motor vehicles thereat. Hence, since the transferor and the transferee of the subject motor vehicle are both VAT exempt individuals, the sale of one (1) unit of 2001 Honda CRV 2.0 A/T by Group Captain Mary Elizabeth Cox, Defence Attache, of the New Zealand Embassy to H.E. Andrew Matheson, Ambassador of the same embassy, for his personal use continues to be tax-exempt. (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. SDEHCc Very truly yours, (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service