DA ITAD BIR Ruling No. 083-10

September 29, 2010 DA ITAD BIR RULING NO. 083-10 Secs. 106 and 108, NIRC of 1997, as amended; Article 34, Vienna Convention on Diplomatic Relations; BIR Ruling No. ITAD-090-01 Embassy of France/French Embassy Trade Commission 34th Floor, Rufino Tower Ayala Avenue cor. Rufino Streets 1229 Makati City Gentlemen : This has reference to your Note Verbale No. 1364/AL dated July 22, 2010, referred to this Office by the Department of Finance (DOF) and the Office of Protocol, Department of Foreign Affairs (DFA), requesting for the exemption from payment of taxes on the purchase of a locally-assembled motor vehicle for the official use of the Embassy of France, specifically described as follows: DHSEcI Make: Toyota Fortuner 4X2 G Diesel M/T Model Year: 2010 Color: Freedom White Engine Number: 2KD5037182 Frame Number: MR0ZR69G200019344 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) 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 France 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 France allows similar exemption to the Philippine Embassy and/or its personnel on their purchase of motor vehicles in France. Hence, the herein local purchase of one (1) unit 2010 Toyota Fortuner 4X2 G Diesel M/T for the official use of the Embassy of France is exempt from VAT. As for the sale made by a VAT-registered business establishment to the qualified foreign embassy, it shall enjoy the benefit of zero percent (0%) VAT pursuant to Revenue Memorandum Order No. 22-2004. This ruling is being issued on the basis of the foregoing facts as presented. However, if upon investigation, it will be disclosed that the actual facts are different, then this ruling shall be without force and effect insofar as the herein parties are concerned. DCASIT Very truly yours, Commissioner of Internal Revenue By: (SGD.) MARISSA O. CABREROS OIC-Assistant Commissioner Legal Service