DA ITAD BIR Ruling No. 091-10

November 9, 2010 DA ITAD BIR RULING NO. 091-10 Secs. 106 & 108, NIRC of 1997; Article 34, Vienna Convention on Diplomatic Relations; BIR RULING NO. DA ITAD 110-09 Embassy of Japan 2627 Roxas Boulevard Pasay City Attention: Dr. Takashi Kosugi First Secretary Gentlemen : This has reference to your Note Verbale No. 458-10 dated September 14, 2010, which was referred to this Office by the Department of Finance (DOF) and the Department of Foreign Affairs (DFA), requesting for exemption from payment of value-added tax (VAT) on the local purchase of a motor vehicle for the personal use of Dr. Takashi Kosugi, First Secretary of the Embassy of Japan, specifically described as follows: DHIaTS Type of Use: Personal Make: Toyota Corolla Altis Model Year: 2010 Chassis Number: MR053ZEE106185461 Engine Number: 3ZZB016535 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." (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 VAT prescribed under Sections 106 and 108 of the National Internal Revenue Code of 1997 (NIRC of 1997), as amended. However, applying the principle of reciprocity, this Office may confirm exemption to the Embassy of Japan and/or its personnel on their local purchase of motor vehicles it appearing from the list submitted by the DFA dated March 22, 2010 that the Government of Japan allows similar exemption to the Philippine Embassy and/or its personnel on their purchase of motor vehicles in Japan. Hence, the local purchase of one (1) unit of 2010 Toyota Corolla Altis, for the personal use of Dr. Takashi Kosugi, First Secretary of the Embassy of Japan is exempt from VAT. (BIR RULING NO. DA ITAD 110-09 dated December 15, 2009) As for the sale made by a VAT-registered business establishment to a qualified foreign embassy or its diplomatic agent, it shall enjoy the benefit of zero percent (0%) VAT pursuant to Revenue Memorandum Order No. 22-2004. aHcACI 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.) MARISSA O. CABREROS OIC-Assistant Commissioner Legal Service