DA ITAD BIR Ruling No. 090-07

October 25, 2007 DA ITAD BIR RULING NO. 090-07 DFA Indorsement dated August 24, 2007; BIR Ruling No. ITAD 041-07 Embassy of the Republica Democratica De Timor-Leste 12th Floor Centerpoint Condominium Garnet Road, Julia Vargas Avenue Ortigas Center Pasig City Gentlemen : This has reference to your letter (RDTL Embassy No. 08/NV/07) dated July 23, 2007, referred to this Office by the Department of Finance and the Department of Foreign Affairs, requesting for the exemption from payment of taxes on the local purchase of motor vehicles, for the official use of the Embassy of the Republica Democratica de Timor-Leste, specifically described as follows: TCEaDI Type of Use: Official Official Make: Nissan Sentra 1.6L GS A/T Nissan Sentra 1.3L GX MT PWR Model Year: 2007 2007 Color: Vivid Black Vivid Black Chassis Number: CDGALUAN16-C13899 CDEALDFN16-C13852 Engine Number: QGT6-003841 QG13-006271 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, the tax exemption privilege of an Embassy and its diplomatic agents does not include exemption from value-added tax (VAT) on their 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 value-added tax prescribed under Sections 106 and 108 of the National Internal Revenue Code of 1997. cTDECH However, applying the principle of reciprocity, this Office may confirm entitlement of VAT exemption of an Embassy and/or its personnel on their local purchases of goods and/or services if it appears from the list submitted by the DFA that the Government of and/or its personnel allows similar exemption to the Philippine Embassy and/or personnel on their purchase of goods and services in its country. The list submitted by DFA dated August 23, 2007 indicates that the Embassy of the Republica Democratica de Timor-Leste is entitled to VAT exemption on local basic goods and services in the Philippines, on the basis of reciprocity. Hence, the Embassy of the Republica Democratica de Timor-Leste and its staff is exempt from VAT on its purchases of basic goods and/or services in the Philippines. Moreover, a separate DFA list of diplomatic missions entitled to VAT exemption on locally-assembled motor vehicle dated August 24, 2007 includes the Embassy of the Republica Democratica de Timor-Leste. Hence, the local purchase of two (2) units of 2007 Nissan Sentra for the official use of the Embassy of the Republica Democratica de Timor-Leste are exempt from VAT. cHEATI 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, (SGD.) GREGORIO V. CABANTAC Deputy Commissioner