DA ITAD BIR Ruling No. 092-10

November 18, 2010 DA ITAD BIR RULING NO. 092-10 Sections 106 & 108 NIRC of 1997; Article 34, Vienna Convention on Diplomatic Relations; BIR Ruling No. ITAD 037-03 Embassy of Malaysia 10th and 11th Floor, World Centre Building 330 Sen. Gil J. Puyat Avenue, Makati City Gentlemen : This refers to your Note Verbale No. BY 263/2010 dated September 20, 2010, which was referred to this Office by the Department of Foreign Affairs (DFA), requesting for tax exemption on the purchase of one (1) unit of 2010 CHRYSLER 300C 2.7V6 for the personal use of His Excellency Dato' Seri Dr. Ibrahim Bin Saad, Ambassador of Malaysia to the Philippines. HEASaC Type of use: Personal Make: CHRYSLER 300C 2.7V6 Model Year: 2010 Color: Mineral Gray Metallic Clear Engine Number: AY103068 Chassis Number: 1C3C86CD1AY103068 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 goods or services; . . . ." (Emphasis supplied) Thus, the tax exemption privilege of an Embassy and its diplomatic agents does not include exemption from VAT and ad valorem tax, 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 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 the exemption from VAT and ad valorem tax of the Embassy and its diplomatic agents on the purchase of the said motor vehicle it appearing from the list submitted by the DFA dated March 22, 2010, that the Government of Malaysia allows similar exemption to the Philippine Embassy and/or its personnel on their local purchases of motor vehicles thereat. Hence, the local purchase of one (1) unit of CHRYSLER 300C 2.7V6 for the personal use of His Excellency Dato' Seri Dr. Ibrahim Bin Saad, Ambassador of Malaysia to the Philippines, is exempt from value-added tax. (BIR Ruling No. ITAD 037-03 dated February 19, 2003) This ruling is being issued on the basis of the foregoing facts as presented. However, if upon investigation, it will be disclosed that the actual facts are different, then this ruling shall be without force and effect insofar as the herein parties are concerned. CIHTac Very truly yours, Commissioner of Internal Revenue By: (SGD.) MARISSA O. CABREROS OIC-Assistant Commissioner Legal Service