DA ITAD BIR Ruling No. 090-09

September 16, 2009 DA ITAD BIR RULING NO. 090-09 Sections 106 & 108, NIRC of 1997; Article 34, Vienna Convention on Diplomatic Relations; BIR Ruling No. DA-ITAD-67-06 Embassy of the Federal Republic of Germany 25/F RCBC Tower II 6819 Ayala Avenue Makati City Attention: Mr. Pit Heltmann Deputy Head of Mission Gentlemen : This has reference to your Note Verbale No. KFZ 41/09 dated July 13, 2009, referred to this Office by the Department of Finance (DOF) and the Office of Protocol and State Visits of the Department of Foreign Affairs (DFA), requesting exemption from payment of value-added tax (VAT) on the purchase from the Embassy of the Federal Republic of Germany in the Philippines of one (1) locally-purchased motor vehicle by Mr. Pit Heltmann, Deputy Head of Mission of the same embassy, specifically described as follows: Type of Use: Personal Make: 2002 Ford Expedition License No.: X0106S00736 Chassis No.: 1FM RU1 5W6 2LA 950 45 Engine No.: 2LA 950 45 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 : cTCEIS (a) indirect taxes of a kind which are normally incorporated in the price of goods or services; . . . ." (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, both of the National Internal Revenue Code of 1997 (NIRC of 1997), as amended. However, applying the principle of reciprocity, this Office may confirm the VAT exemption of the Embassy of the Federal Republic of Germany and/or its personnel on their local purchase of motor vehicles it appearing from the list submitted by the DFA dated February 10, 2009, that the government of Germany allows similar exemption to the Philippine Embassy and/or its personnel on their local purchases of motor vehicles thereat. Hence, since the transferor and the transferee of the subject motor vehicle are both VAT exempt, the sale of one (1) unit of 2002 Ford Expedition by the Embassy of the Federal Republic of Germany to Mr. Pit Heltmann, Deputy Head of Mission of the same embassy, for his personal use continues to be exempt from VAT. (BIR Ruling No. ITAD-67-06 dated June 8, 2006) 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.) JAMES H. ROLDAN Assistant Commissioner Legal Service