DA ITAD BIR Ruling No. 105-06

September 12, 2006 DA ITAD BIR RULING NO. 105-06 DFA Indorsement dated September 7, 2006; NICA letter dated February 21, 2006 Embassy of the Hashemite Kingdom of Jordan Tokyo, Japan Attention: Mr. Ali Mahmoud Ali-Al-Wishah First Secretary Gentlemen : This has reference to your Note No. PH/2/365 dated June 6, 2006 referred to this Office by the immunities and Privileges Division, Office of Protocol of the Department of Foreign Affairs (DFA), requesting for the issuance of value added tax (VAT) exemption certificate for Mr. ALI MAHMOUD ALI-AL-WISHAH, First Secretary of the Embassy of Jordan. In reply, please be informed of Article 34 of the Vienna Convention on Diplomatic Relations, pertinent portion of which 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" Thus, the tax exemption privilege of an Embassy and its diplomatic agents does not include exemption from value added tax (VAT) and ad valorem taxes on their local purchases of goods and services. In other words, purchases by that Embassy of goods and/or services shall generally 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 entitlement to VAT exemption of an Embassy and/or its personnel on their local purchases of goods and/or services if it appears from the list submitted by the DFA that the Government of such Embassy or personnel allows similar exemption to Philippine Embassy personnel on their purchase of goods and services in its country. We note that the Hashemite Kingdom of Jordan has no Embassy in the Philippines. Nevertheless, the DFA issued favorable endorsement of Mr. Ali Mahmoud Ali-Al-Wishah's request addressed to this Office, dated September 7, 2006. In this indorsement, the DFA stated: "The Office of Protocol and State Visits has the honor to request for the issuance of Value-added Tax Certificate in favor of Mr. Ali Mahmoud Wishah, First Secretary of the Embassy of Jordan. In this regard, the Department received a letter from National Intelligence Coordinating Agency (NICA) that this special arrangement between the Philippines and Jordan was a product of the discussion between then Crown Prince Abdullah of Jordan and her Excellency President Gloria Macapagal Arroyo sometime in early 2002. Furthermore, the grant of VAT exemption privilege to the Jordanian Diplomat and his wife has been cleared by the Office of the Secretary, Department of Foreign Affairs." Furthermore, the February 21, 2006 letter of Director General Cesar P. Garcia, Jr. of the NICA, Office of the President, stated that Mr. Virgilio Lacaba, our Filipino Liaison Officer in Jordan has been issued a tax exemption certificate. In view thereof, this Office is of the opinion and so holds that the grant of VAT exemption privileges in the instant case is in place. Hence, Mr. ALI MAHMOUD ALI-AL-WISHAH, First Secretary of the Embassy of The Hashemite Kingdom of Jordan is exempt from value added tax on his purchases of local goods and/or services. SHECcT Very truly yours, (SGD.) JOSE MARIO C. BUAG Commissioner of Internal Revenue