DA ITAD BIR Ruling No. 106-10

December 28, 2010 DA ITAD BIR RULING NO. 106-10 Sections 106 & 108 of the National Internal Revenue Code of 1997; Article 34, Vienna Convention on Diplomatic Relations; BIR Ruling No. ITAD-67-06 Embassy of Japan 2627 Roxas Boulevard Pasay City Attention: Mr. Shinichi Masuda Second Secretary Gentlemen : This has reference to your Note Verbale No. 434-10 dated September 30, 2010, referred to this Office by the Department of Finance (DOF) and the Office of Protocol and State Visits of the Department of Foreign Affairs (DFA), requesting exemption from payment of value-added tax (VAT) on the purchase of a second hand, previously imported, and tax exempted motor vehicle, by Mr. Shinichi Masuda, Deputy Resident Representative, Japan International Cooperation Agency (JICA), under the Embassy of Japan, from Mr. Chiho Tanaka, Assistant Resident Representative also of JICA, specifically described as follows: Type of Use: Personal Make: 2002 Toyota Revo Plate No.: OEV-24943 Chassis No.: KF80-8024860 Engine No.: 7K-0476844 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 : ECaTAI (a) indirect taxes of a kind which are normally incorporated in the price of goods or services; . . . ." (Underscoring supplied) Thus, the tax exemption privilege of an Embassy and its diplomatic agents does not include exemption from value-added tax (VAT), which is an indirect tax, on their local purchase of goods and services. In other words, purchases by that Embassy or its agents of goods and services shall, in general, be subject to the VAT prescribed under Sections 106 and 108, both of the National Internal Revenue Code of 1997, as amended. However, applying the principle of reciprocity, this Office may confirm the VAT exemption of the Embassy of Japan 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 Japan allows similar exemption to the Philippine Embassy in Japan and its personnel on their local purchase of motor vehicles thereat. Hence, since the transferor and the transferee of the subject motor vehicle are both VAT-exempt individuals, the purchase of one (1) unit of 2002 Toyota Revo by Mr. Shinichi Masuda from Mr. Chiho Tanaka, both of JICA and under the Embassy of Japan for the personal use of the former continues to be exempt from VAT. (BIR Ruling No. ITAD-67-06 dated June 8, 2006) 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. (SGD.) MARISSA O. CABREROS OIC-Assistant Commissioner Legal Service