DA ITAD BIR Ruling No. 081-08

October 30, 2008 DA ITAD BIR RULING NO. 081-08 Sec. 106 & 108 of the Tax Code 1997; Article 34, Vienna Convention on Diplomatic Relations; BIR Ruling No. DA-ITAD-011-07 Embassy of Japan 2627 Roxas Boulevard Pasay City, Manila Gentlemen : This has reference to your Note No. 401-08 dated September 1, 2008 referred to this Office by the Department of Finance (DOF) and the Department of Foreign Affairs (DFA), requesting for exemption from payment of value-added tax (VAT) on the local purchase of a motor vehicle, for the official use of the Embassy of Japan, specifically described as follows: DaHISE Type of Use: Official Make: Toyota Camry 2.4G A/T Model Year: 2008 Chassis Number: MR053BK4007029827 Engine Number: 2AZE114406 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" Thus, tax exemption privilege of an Embassy and its diplomatic agents does not include exemption from VAT on its local purchases of goods and services. In other words, purchases by that Embassy and its diplomatic agents of goods and/or services shall be subject to VAT prescribed under Sections 106 and 108 of the National Internal Revenue Code of 1997, as amended (Tax Code of 1997). However, applying the principle of reciprocity, this Office may grant exemption to the Embassy of Japan and/or its personnel on their local purchases of motor vehicles it appearing from the list submitted by the Department of Foreign Affairs as of January 25, 2008 that the Government of Japan allows similar exemption to the Philippine Embassy and its personnel on their purchases of motor vehicles in Japan. Hence, the local purchase of one (1) unit of 2008 Toyota Camry 2.4G A/T, for the official use of the Embassy of Japan is exempt from VAT (BIR Ruling No. DA-ITAD-011-07 dated January 31, 2007). 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. cDICaS (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service