DA ITAD BIR Ruling No. 078-10

August 25, 2010 DA ITAD BIR RULING NO. 078-10 Secs. 106 and 108, NIRC of 1997, as amended; Article 34, Vienna Convention on Diplomatic Relations; BIR Ruling No. DA-ITAD-072-09 Embassy of Switzerland 24/F, Equitable Bank Tower 8751, Paseo de Roxas Makati City Attention: Ms. Verena Brigitta Mathis First Secretary/Consul Gentlemen : This has reference to your Note No. 48/2010 dated July 6, 2010 referred to this Office by the Department of Finance and the Department of Foreign Affairs (DFA), requesting for the exemption from payment of value-added tax (VAT) on the purchase of a second-hand, previously tax-exempted motor vehicle for the personal use of Ms. Verena Brigitta Mathis, First Secretary/Consul of the Embassy of Switzerland from H.E. Peter Sutter, Ambassador Extraordinary and Plenipotentiary of the same Embassy, specifically described as follows: Make: Honda CRV 4X4 2.4 liter, SUV Wagon A/T Model Year: 2006 Color: Black Engine Number: RRMD55-6400537 Frame Number: PADRD78506V400536 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 the goods and services; xxx xxx xxx." (Emphasis supplied) IHaCDE 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 of the National Internal Revenue Code of 1997 (NIRC of 1997) as amended. However, applying the principle of reciprocity, this Office may confirm exemption of the Embassy of Switzerland and/or its personnel on their purchase of motor vehicles it appearing from the list submitted by the DFA dated March 22, 2010 that the Government of Switzerland allows similar exemption to the Philippine Embassy and/or its personnel on their purchase of motor vehicles in Switzerland. Hence, since the transferor and the transferee of the subject motor vehicle are VAT exempt individuals, the sale of one (1) unit 2006 Honda CRV 4X4 2.4 liter, SUV Wagon A/T by H.E. Peter Sutter to Ms. Verena Brigitta Mathis, for the latter's personal use continues to be exempt from VAT. (BIR Ruling No. DA-ITAD-072-09 dated July 31, 2009) 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. DITEAc Very truly yours, (SGD.) MARISSA O. CABREROS OIC-Assistant Commissioner Legal Service