DA ITAD BIR Ruling No. 098-10

November 22, 2010 DA ITAD BIR RULING NO. 098-10 Secs. 106 & 108, NIRC of 1997; Article 34, Vienna Convention on Diplomatic Relations; BIR Ruling No. DA ITAD-48-01 Embassy of the Islamic Republic of Iran 16 Santa Potenciana Street, Urdaneta Village Makati City Gentlemen : This has reference to your Note Verbale No. 200/1452 dated October 20, 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 official use of the Embassy of the Islamic Republic of Iran, specifically described as follows: SAHITC Type of Use: Official Make: Toyota Hi Ace Commuter 2.5L Diesel M/T Model Year: 2010 Frame Number: JTFJSO2P905010982 Engine Number: 2KD5159032 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 that Embassy of goods and services shall, in general, be subject to the 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 the Islamic Republic of Iran 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 the Islamic Republic of Iran allows similar exemption to the Philippine Embassy in Iran and its personnel on their purchase of motor vehicles in Iran. Hence, the local purchase of one (1) unit of 2010 TOYOTA HI ACE COMMUTER 2.5L DIESEL M/T, for the official use of the Embassy of the Islamic Republic of Iran, is exempt from VAT. (BIR Ruling No. DA ITAD-48-01 dated May 15, 2001) ITCHSa As for the sale made by the VAT-registered business establishment to the Embassy of the Islamic Republic of Iran, 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. Very truly yours, (SGD.) MARISSA O. CABREROS OIC-Assistant Commissioner Legal Service