DA ITAD BIR Ruling No. 095-09

September 24, 2009 DA ITAD BIR RULING NO. 095-09 Section 109 of the National Internal Revenue Code of 1997; Article III, Section 10, Vienna Convention on the Privileges and Immunities of the Specialized Agencies of the United Nations; BIR Ruling No. DA-ITAD-107-06 Food and Agriculture Organization of the United Nations 29th Floor, Yuchengco Tower RCBC Plaza, 6819 Ayala Avenue Makati City Attention: Mr. Kazuyuki Tsurumi FAO Representative Gentlemen : This has reference to your letter dated 22 April 2009 referred to this Office by the Department of Finance (DOF) and the Office of Protocol & State Visits of the Department of Foreign Affairs (DFA), requesting exemption from payment of value-added tax (VAT) on the purchase of one (1) motor vehicle, for the official use of the Food and Agriculture Organization (FAO) of the United Nations (UN), specifically described as follows: Make: Ford Everest 4x4 A/T Model year: 2008 Color: Arizona Gold Chassis No.: MNCUS4E908W213925 Engine No.: WEAT180822 In reply, please be informed that Section 109 of the National Internal Revenue Code of 1997, as amended (NIRC of 1997), provides, viz. : "SEC. 109. Exempt Transactions. Subject to the provisions of Subsection (2) hereof, the following transactions shall be exempt from the value-added tax: xxx xxx xxx (K) Transactions which are exempt under international agreements to which the Philippines is a signatory or under special laws, except those under Presidential Decree No. 529; IcCDAS xxx xxx xxx" In relation thereto, the 2 November 1977 of the letter of Ambassador Carlos J. Valdes to Director General Edouard Saouma of the Food and Agriculture Organization, which is part of the Exchange of Letters constituting the Agreement between the Government of the Republic of the Philippines and FAO, provides: "I have the honor to refer to the proposed appointment of an FAO representative to the Philippines and the establishment of his office. In this connection, we would like to present for your concurrence the following revised terms and conditions . . . To the extent that it is not already bound to do so, the Government agrees to apply to the Organization, its staff, funds, property and assets, the provisions of the Convention on the Privileges and Immunities of the Specialized Agencies. The FAO Representative shall be accorded the treatment provided for in Section 21 of the said Convention. The Government also agrees to grant FAO, and to the FAO Representative and his staff, privileges and immunities not less favourable than those granted to a representative of any other specialized agency or similar United Nations body in the Philippines. xxx xxx xxx" Accordingly, Section 10, Article III of the Convention on the Privileges and Immunities of the Specialized Agencies of the UN dated 21 November 1947 provides: "Article III xxx xxx xxx Section 10 While the specialized agencies will not, as a general rule, claim exemption from excise duties and from taxes on the sale of movable and immovable property which form part of the price to be paid, nevertheless when the specialized agencies are making important purchases for official use of property on which such duties and taxes have been charged or chargeable, States parties to this Convention will, whenever possible, make appropriate administrative arrangements for the remission or return of the amount of duty or tax. HIaAED xxx xxx xxx" This Bureau has taken the position that the aforecited provision on the imposition of taxes on the important purchases for FAO's official use shall mean that, in lieu of the provision on the remission or refund of amount of tax due, a tax exemption privilege can be granted. (VAT Ruling No. 143-90, dated May 23, 1990, revoking VAT Ruling No. 176-89 dated August 4, 1989) Thus, based on the above provision, important purchases of property in the Philippines for the official use of the specialized agencies of the UN are accorded exemption from indirect taxes such as the VAT imposed under Section 106 of the NIRC of 1997. In view of the foregoing, this Office is of the opinion and so holds that aforementioned purchase of one (1) unit 2008 Ford Everest 4x4 A/T, for the official use of the FAO, is exempt from VAT, pursuant to Section 109 (K) of the NIRC of 1997 and the Agreement between the Government of the Philippines and the Convention on the Privileges and Immunities of the Specialized Agencies of the United Nations. (BIR Ruling No. DA-ITAD-107-06 dated September 15, 2006) It is hereby understood that this exemption applies to vehicles purchased under the name of FAO for its official use. 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. caSDCA Very truly yours, (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service