DA ITAD BIR Ruling No. 094-10

November 22, 2010 DA ITAD BIR RULING NO. 094-10 Sections 106 & 108, NIRC of 1997; Article 34, Vienna Convention on Diplomatic Relations; BIR Ruling No. ITAD-34-99 Embassy of the United States of America 1201 Roxas Boulevard Ermita 1000 Manila Attention: Paul S. Dever Contracting & Procurement Officer Gentlemen : This has reference to your Note Verbale Nos. 1626 and 1628 dated October 7, 2010 and October 8, 2010, respectively, which was 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 of four (4) motor vehicles, for the official use of the Embassy of the United States of America in the Philippines, specifically described as follows: aIcDCA Make Chassis Number Engine Number two 2010 Ford Everest 3.0L 4X4 A/T MNCUS4E90AW309223 WEAT1 138423 (2) Limited Edition units MNCUS4E90AW308634 WEAT1 135859 two MNCLS4D10AW310906 WLAT1 208834 (2) 2010 Ford Everest 2.5L 4X2 A/T units MNCLS4D10AW310890 WLAT1 208650 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, 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 on the purchase of the said motor vehicles it appearing from the list submitted by the DFA dated March 22, 2010, that the Government of the United States of America allows similar exemption to the Philippine Embassy and/or its personnel on their local purchases of motor vehicles thereat. Hence, the local purchase of two (2) units 2010 Ford Everest 2.5L 4x2 A/T and two (2) units 2010 Ford Everest 3.0L 4x4 A/T Limited Edition for the official use of the Embassy of the United States of America is exempt from VAT on the basis of reciprocity. (BIR Ruling No. DA-ITAD-34-99 dated October 18, 1999) As for the sale made by a VAT-registered business establishment to the qualified foreign embassy, it shall enjoy the benefit of zero percent (0%) VAT pursuant to Revenue Memorandum Order No. 22-2004. 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. IHAcCS Very truly yours, Commissioner of Internal Revenue By: (SGD.) MARISSA O. CABREROS OIC-Assistant Commissioner Legal Service