DA ITAD BIR Ruling No. 088-06

August 2006 DA ITAD BIR RULING NO. 088-06 Secs. 108, 109 & 149 of the National Internal Revenue Code of 1997; Article 34 of the Vienna Convention; BIR Ruling No. ITAD-34-99 Embassy of the United States of America Roxas Boulevard Manila Attention: Mr. Brian Rinaldi Deputy Chief, Navy Programs of the Embassy (JUSMAG) Gentlemen : This has reference to your Note Verbale No. 06-1515 dated June 30, 2006 referred to this Office by the Department of Finance (DOF) and the Department of Foreign Affairs (DFA), requesting for a tax-free purchase of one (1) locally assembled motor vehicle described hereunder, for the personal use of Mr. Brian Rinaldi, Deputy Chief, Navy Programs (JUSMAG) of the Embassy of the United States of America: Make: Ford Focus 1.8L AT (without skirts) Model Year: 2006 Color: Platinum VIN No.: PE163L0351AM00045 Engine No.: BD000079 In reply, please be informed that pursuant to Article 34 of the Vienna Convention on Diplomatic Relations, pertinent portion of which 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 goods or services; "xxx xxx xxx" Thus, the tax exemption privilege of an Embassy and its diplomatic agents does not include exemption from the value-added tax (VAT) on its local purchases of goods and services. In other words, purchases by that Embassy of goods and/or services shall be subject to the value-added tax prescribed under Sections 106 and 108, and ad valorem taxes under Section 149, all of the National Internal Revenue Code of 1997. However, applying the principle of reciprocity, this Office may grant exemptions to the Embassy of the United States of America or its personnel on their local purchases of goods and/or services it appearing from the list submitted by the Department of Foreign Affairs that your Government allows similar exemption to Philippine Embassy and/or its personnel on their purchases of goods and services in your country. Hence, the herein local purchase of one (1) unit of Ford Focus 1.8L AT for the personal use of Mr. Brian Rinaldi, Deputy Chief, Navy Programs (JUSMAG) of the Embassy of the United States of America is exempt from VAT and ad valorem taxes. (BIR Ruling No. DA-ITAD-34-99 dated October 18, 1999) cADaIH Very truly yours, (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service