DA ITAD BIR Ruling No. 107-10

December 28, 2010 DA ITAD BIR RULING NO. 107-10 Sections 106 and 108, NIRC of 1997, as amended; Article 34, Vienna Convention on Diplomatic Relations; BIR Ruling No. DA-ITAD-036-10 Embassy of the United States of America 1201 Roxas Boulevard Ermita 1000 Manila Attention: Mr. Jeffrey Michael Dill Air Force Operations Officer Gentlemen : This has reference to your Note No. 1458 dated October 14, 2010 referred to this Office by the Department of Finance and the Department of Foreign Affairs (DFA), requesting for the exemption from payment of value-added tax (VAT) on the purchase of a second-hand, previously tax-exempted motor vehicle for the personal use of Mr. Jeffrey Michael Dill, Air Force Operations of the Embassy of the United States of America from Mr. Marvin F. Burgos, a former USAID Inspector of the Mission of the same Embassy, specifically described as follows: Make: Toyota Fortuner 4X2 G Gas A/T Model Year: 2006 Color: Lithium Engine Number: MR0ZX69G4-00008626 Frame Number: 2TR-6271720 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 : TSIEAD (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 its local purchases of goods and services. In other words, purchases by that Embassy of goods and/or 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 of the Embassy of the United States of America and/or its personnel on their purchase of motor vehicles it appearing from the list submitted by the DFA dated March 22, 2010 that the Government of America allows similar exemption to the Philippine Embassy and/or its personnel on their purchase of motor vehicles in the US. Hence, since the transferor and the transferee of the subject motor vehicle are VAT exempt individuals, the sale of one (1) unit 2006 Toyota Fortuner 4X2 G Gas A/T by Mr. Marvin F. Burgos to Mr. Jeffrey Michael Dill, for the latter's personal use continues to be exempt from VAT. (BIR Ruling No. DA-ITAD-036-10 dated March 25, 2010) 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