DA ITAD BIR Ruling No. 100-08

November 21, 2008 DA ITAD BIR RULING NO. 100-08 Sec. 106 & 108 of the NIRC of 1997; Article 34, Vienna Convention on Diplomatic Relations; VAT Ruling No. 10-97 Embassy of Chile 17th Floor Liberty Bldg. 104 H.V. de la Costa Street Salcedo Village, Makati City Gentlemen : This has reference to your Note No. 42-2006 dated December 15, 2006 referred to this Office by the Department of Foreign Affairs, requesting for the exemption from payment of value-added tax (VAT) on the payment of rentals on the Chancery and Residence of the Embassy of Chile. 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; TCaEAD "xxx xxx xxx" Thus, the tax exemption privilege of an Embassy and its diplomatic agents does not include exemption from value-added tax (VAT) on its local purchases of goods and services. In other words, purchases by an Embassy of goods and/or services shall, in general, be subject to the value-added tax 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 VAT exemption of the Embassy of Chile and/or its personnel on their rental payments based on a favorable indorsement by the Department of Foreign Affairs categorically stating that the Government of Chile accords similar exemption to the Philippine Embassy and its personnel on their rental payments in Chile. Hence, with the favorable indorsement of the DFA categorically stating that there is no tax whatsoever including VAT being imposed in the Philippine Embassy in Santiago, Chile on its rental payments, this Office confirms that the Embassy of Chile is exempt from VAT on its payments of rentals on its Chancery and Residence in the Philippines, on the basis of reciprocity. (BIR Ruling No. ITAD-065-03 dated April 25, 2003) 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. TCcSDE Very truly yours, (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service