DA ITAD BIR Ruling No. 097-10

November 22, 2010 DA ITAD BIR RULING NO. 097-10 Secs. 106 & 108, NIRC of 1997; Article 34, Vienna Convention on Diplomatic Relations; BIR RULING NO. DA ITAD 95-04 Embassy of Papua New Guinea 3rd Floor, Corinthian Plaza Condominium Bldg., Paseo de Roxas, Legaspi Village Makati City Attention: Ms. Lovelyn Mando Ipaug Second Secretary (Immigration) Gentlemen : This has reference to your Note Verbale No. 37/2010 dated October 22, 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 and official use of Ms. Lovelyn Mando Ipaug, Second Secretary (Immigration) of the Embassy of Papua New Guinea, specifically described as follows: TCADEc Type of Use: Personal and official use Make: Toyota Corolla Altis 1.6 E Model Year: 2010 Chassis Number: MR053ZEE106184795 Engine Number: 3ZZB029366 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 their local purchase of goods and services. In other words, purchases by a diplomatic agent of goods and 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 Papua New Guinea and 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 Papua New Guinea allows similar exemption to the Philippine Embassy in Papua New Guinea and its personnel on their purchase of motor vehicles in Papua New Guinea. Hence, the local purchase of one (1) unit of 2010 Toyota Corolla Altis 1.6E, for the personal and official use of Ms. Lovelyn Mando Ipaug, Second Secretary (Immigration) of the Embassy of Papua New Guinea, is exempt from VAT. (BIR RULING NO. DA ITAD 95-04 dated August 31, 2004) As for the sale made by the VAT-registered business establishment to Ms. Lovelyn Mando Ipaug, it shall enjoy the benefit of zero percent (0%) VAT pursuant to Revenue Memorandum Order No. 22-2004. 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. HcACST Very truly yours, (SGD.) MARISSA O. CABREROS OIC-Assistant Commissioner Legal Service