DA ITAD BIR Ruling No. 088-14

October 21, 2014 DA ITAD BIR RULING NO. 088-14 Sec. 106 (A) (2) (c), 1997 NIRC, as amended; Article 3, PH-IOM Cooperation Agreement; BIR Ruling No. ITAD-194-14 International Organization for Migration 28th Floor, Citibank Tower, 8741 Paseo de Roxas, Makati City Attention: Marco Boasso Director, Manila (Global) Administrative Centre Chief of Mission, the Philippines Gentlemen : This refers to your letter dated September 22, 2014 indorsed to this Office by the Department of Finance (DOF) and the Department of Foreign Affairs (DFA), requesting exemption from value-added tax (VAT) on the local purchase of four (4) units of motor vehicle for the official use of the International Organization for Migration (IOM), specifically described as follows: Make Model Color Chassis No. Engine No. Toyota Fortuner 4x4 3.0 V 2014 Silky Gold MHFYZ59G304010038 1KDU552040 DSL A/T Mica Toyota Fortuner 4x4 3.0 V 2014 Dark Steel MHFYZ59G204010709 1KDU579550 DSL A/T Mica Toyota Fortuner 4x4 3.0 V 2014 Dark Steel MHFYZ59G304010976 1KDU593211 DSL A/T Mica Toyota Fortuner 4x4 3.0 V 2014 Silky Gold MHFYZ59G904011047 1KDU597140 DSL A/T Mica In reply, please be informed that Article 3 of the 13 March 2003 Cooperation Agreement between the Government of the Republic of the Philippines and the International Organization for Migration (PH-IOM Cooperation Agreement) provides, as follows: "Article 3 1. The Organization shall enjoy in the Republic of the Philippines the same privileges and immunities as those granted to the specialized agencies of the United Nations by virtue of the Convention on the privileges and immunities of the specialized agencies of 21 November 1947. ISAcHD 2. In particular, the Organization shall be exempt from all indirect taxes for purchases of articles intended for official use. 3. The Organization shall be exempt from all taxes and customs duties in respect of the importation of motor vehicles for its official use in the Philippines. The importation of the additional motor vehicles by the Organization shall be subject to prior consultation and approval of the Government. None of the Organization's motor vehicles may be sold or transferred to non-tax-exempt persons or entities without the prior approval of the Government and without the corresponding customs and duties being paid on them by such non-tax-exempt buyers. However, the motor vehicles may be exported subject to existing laws and regulations of the Philippine Government. 4. The Organization shall not sell within the country the goods imported duty free, except with the Government's approval and under conditions stipulated by the Government." Based on the above provisions of the PH-IOM Cooperation Agreement, IOM shall enjoy privileges as those granted to specialized agencies of the UN and shall be exempt from all indirect taxes for purchases of articles intended for official use. Moreover, pursuant to Section 106 (A) (2) (c) of the 1997 National Internal Revenue Code (1997 NIRC, as amended), sales of goods by VAT-registered sellers to persons or entities whose exemption under special laws or international agreements to which the Philippines is a signatory effectively subjects such sales to zero rate are subject to VAT at zero percent (0%) rate, thus: "SEC. 106. Value-Added Tax on Sale of Goods or Properties. (A) Rate and Base of Tax. There shall be levied, assessed and collected on every sale, barter or exchange of goods or properties, value-added tax equivalent to ten percent (10%) of the gross selling price or gross value in money of the goods or properties sold, bartered or exchanged, such tax to be paid by the seller or transferor: Provided, . . . xxx xxx xxx (2) The following sales by VAT-registered persons shall be subject to zero percent (0%) rate: aSHAIC xxx xxx xxx (c) Sales to persons or entities whose exemption under special laws or international agreements to which the Philippines is a signatory effectively subjects such sales to zero rate." In view thereof, this Office is of the opinion as it hereby holds that the sale of four (4) units 2014 Toyota Fortuner 4x4 3.0 V DSL A/T by the VAT-registered local car dealer to IOM, for its official use, shall be subject to VAT at zero-percent (0%) rate pursuant to Section 106 (A) (2) (c) of the 1997 NIRC, as amended in relation to Article 3 of the PH-IOM Cooperation Agreement. (BIR Ruling No. ITAD-194-14 dated September 22, 2014) 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. Very truly yours, Commissioner of Internal Revenue By: (SGD.) MARISSA O. CABREROS Assistant Commissioner Legal Service Bureau of Internal Revenue