DA ITAD BIR Ruling No. 102-10

December 13, 2010 DA ITAD BIR RULING NO. 102-10 Secs. 106 & 108, NIRC of 1997 Article 34, Vienna Convention on Diplomatic Relations; BIR RULING NO. DA-ITAD 061-10 Embassy of Japan 2627 Roxas Boulevard Pasay City Attention: Mr. Shinsuke Shimizu Minister Gentlemen : This has reference to your Note Verbale No. 509-10 dated October 15, 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 use of Mr. Shinsuke Shimizu, Minister of the Embassy of Japan, specifically described as follows: Type of Use: Personal Make: Honda Accord Model Year: 2010 Chassis Number: MRHCP2620AP010222 Engine Number: K24Z23954045 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 : CacHES (a) indirect taxes of a kind which are normally incorporated in the price of the goods and services; xxx xxx xxx." (Underscoring 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 and its agents of goods and/or 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 Japan and its diplomatic agents on their local purchase of motor vehicles it appearing from the list submitted by the DFA dated March 22, 2010 that the Government of Japan allows similar exemption to the Philippine Embassy and/or its personnel on their purchase of motor vehicles in Japan. Hence, the local purchase of one (1) unit of 2010 Honda Accord, for the personal use of Mr. Shinsuke Shimizu, Minister of the Embassy of Japan is exempt from VAT. (BIR RULING NO. DA ITAD 061-10 dated June 16, 2010). As for the sale made by a VAT-registered business establishment to a qualified foreign embassy or its diplomatic agent, that establishment 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. IcHSCT Very truly yours, (SGD.) MARISSA O. CABREROS OIC-Assistant Commissioner Legal Service