DA ITAD BIR Ruling No. 097-14

December 2, 2014 DA ITAD BIR RULING NO. 097-14 Principle of Reciprocity; BIR Ruling No. ITAD-053-14 Embassy of the United States of America 1201 Roxas Boulevard Manila, Philippines 1000 Attention: Jimmi N. Sommer Second Secretary Gentlemen : This has reference to your Note No. 1860 dated October 21, 2014 referred to this Office by the Department of Finance (DOF) and the Department of Foreign Affairs (DFA), requesting for the exemption from the payment of value-added tax (VAT) on the local purchase of (30) thirty units motor vehicle for the official use of the Embassy of the United States of America, specifically described as follows: Make Model Color Frame Engine Honda CRF 250 2014 Red MLHMD389XD5003035 MD38E-2016064 Honda CRF 250 2014 Red MLHMD3895D5003010 MD38E-2016039 Honda CRF 250 2014 Red MLHMD3894D5002978 MD38E-2016007 Honda CRF 250 2014 Red MLHMD3896D5002951 MD38E-2015981 Honda CRF 250 2014 Red MLHMD3893D5003006 MD38E-2016035 Honda CRF 250 2014 Red MLHMD389XD5003360 MD38E-2016934 Honda CRF 250 2014 Red MLHMD3896D5003355 MD38E-2016921 Honda CRF 250 2014 Red MLHMD3891D5003022 MD38E-2016051 Honda CRF 250 2014 Red MLHMD3893D5002969 MD38E-2015998 Honda CRF 250 2014 Red MLHMD3899D5002863 MD38E-2015901 Honda CRF 250 2014 Red MLHMD3892D5003028 MD38E-2016057 Honda CRF 250 2014 Red MLHMD389XD5003021 MD38E-2016050 Honda CRF 250 2014 Red MLHMD3896D5003002 MD38E-2016031 Honda CRF 250 2014 Red MLHMD389XD5002936 MD38E-2015965 Honda CRF 250 2014 Red MLHMD3890D5002931 MD38E-2015960 Honda CRF 250 2014 Red MLHMD3896D5003257 MD38E-2016855 Honda CRF 250 2014 Red MLHMD3896D5003016 MD38E-2016045 Honda CRF 250 2014 Red MLHMD389XD5003004 MD38E-2016033 Honda CRF 250 2014 Red MLHMD3897D5002991 MD38E-2016020 Honda CRF 250 2014 Red MLHMD3898D5002952 MD38E-2015982 Honda CRF 250 2014 Red MLHMD3890D5003318 MD38E-2016927 Honda CRF 250 2014 Red MLHMD3891D5003330 MD38E-2016941 Honda CRF 250 2014 Red MLHMD3893D5003359 MD38E-2016940 Honda CRF 250 2014 Red MLHMD3895D5003301 MD38E-2016898 Honda CRF 250 2014 Red MLHMD3892D5003286 MD38E-2016883 Honda CRF 250 2014 Red MLHMD3899D5003270 MD38E-2016869 Honda CRF 250 2014 Red MLHMD3895D5003265 MD38E-2016862 Honda CRF 250 2014 Red MLHMD3890D5003254 MD38E-2016851 Honda CRF 250 2014 Red MLHMD3894D5003225 MD38E-2016822 Honda CRF 250 2014 Red MLHMD3896D5003212 MD38E-2016809 In reply, please be informed that Article 34 of the Vienna Convention on Diplomatic Relations reads: DAETcC "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" Thus, the tax exemption privilege of an Embassy and its diplomatic agents does not include exemption from VAT 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 of the National Internal Revenue Code of 1997, as amended. However, applying the principle of reciprocity, this Office may confirm exemption of the Embassy of the United States of America and/or its personnel on their local purchase of motor vehicles it appearing from the list submitted by the DFA dated October 13, 2014 that the Government of the United States of America allows similar exemption to the Philippine Embassy and/or its personnel on their purchase of motor vehicles in the United States. In view thereof, the local sale of thirty (30) units of 2014 Honda CRF 250 Motorcycle for the official use of the Embassy of the United States of America, being an entity exempt from VAT, shall be subject to VAT at zero-percent (0%) rate pursuant to Section 106 (A) (2) (c) of the NIRC of 1997 as amended. (BIR Ruling No. ITAD-053-14 dated May 15, 2014) 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, Commissioner of Internal Revenue By: (SGD.) MARISSA O. CABREROS Assistant Commissioner Legal Service Bureau of Internal Revenue