DA ITAD BIR Ruling No. 091-07

September 24, 2007 DA ITAD BIR RULING NO. 091-07 Sections 106 & 108 of the National Internal Revenue Code of 1997; Article 34, Vienna Convention; BIR Ruling No. ITAD-44-05 Embassy of the People's Republic of China 4896 Pasay Road, Dasmarias Village Makati City Attention: Mr. Wang Jiaxin Second Secretary Gentlemen : This has reference to your Note Verbale No. (07) 300 dated August 17, 2007, referred to this Office by the Office of Protocol and State Visits, Department of Foreign Affairs (DFA), requesting for tax-free purchase of a local motor vehicle for the personal use of Mr. Wang Jiaxin, Second Secretary of the Embassy of the People's Republic of China, specifically described as follows: Make: Mazda6 2.3Li A/T Model Year: 2007 Color: Silver Contrail Engine Number: L310251887 Chassis Number: JM7GG423271544700 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: HASDcC "(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, in general, be subject to the VAT prescribed under Sections 106 and 108, both of the National Internal Revenue Code of 1997. However, applying the principle of reciprocity, this Office may confirm VAT exemption of the Embassy of the People's Republic of China or its personnel on their local purchase of motor vehicles it appearing from the list submitted by the Department of Foreign Affairs as of August 24, 2007 that your Government allows similar exemption to Philippine Embassy and/or its personnel on their purchases of local goods and services. Hence, the herein local purchase of one (1) unit of 2007 Mazda6 2.3Li A/T for the personal use of Mr. Wang Jiaxin, Second Secretary of the Embassy of the People's Republic of China is exempt from VAT. (BIR Ruling No. ITAD-44-05 dated May 19, 2005) 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