DA ITAD BIR Ruling No. 108-09

December 4, 2009 DA ITAD BIR RULING NO. 108-09 Article 109 (K), NIRC of 1997, as amended; Article 3 (10), Convention on the Privileges and Immunities of the Specialized Agencies of the United Nations; BIR Ruling No. DA-ITAD-55-08 The World Bank 23/F The Taipan Place Building F. Ortigas Jr. Road, Ortigas Center Pasig City Attention: Mr. Bert Hofman Country Director, Philippines East Asia and the Pacific Region Gentlemen : This refers to your letter dated 29 September 2009, endorsed to this Office by the Department of Finance and the Department of Foreign Affairs, requesting exemption from the payment of value-added taxes on the purchase of one (1) locally-assembled motor vehicle, for the official use of The World Bank, specifically described as follows: Type of Use: Official Make: Toyota Hi Ace Commuter Van 2.5 DSL Model Year: 2009 Color: Dark Green Mica Metallic Engine Number: 2KD-1927070 Chassis Number: JTFJS02P100018491 In reply, please be informed that Section 106 (A) (2) (c) of the National Internal Revenue Code (NIRC) of 1997, as amended, provides, viz. : "SEC. 106. Value-added Tax on Sale of Goods or Properties. (A) Rate and Base Tax. There shall be levied, assessed and collected on every sale, barter or exchange of goods or properties, a value-added tax equivalent to ten percent (10%) of the gross selling price or gross value in money of the goods or properties sold, bartered or exchanged, such tax to be paid by the seller or transferor: Provided, That the President, upon the recommendation of the Secretary of Finance, shall, effective January 1, 2006, raise the rate of value-added tax to twelve-percent (12%), . . ." HAECID However, Section 109 (K) of the NIRC of 1997, as amended, provides, viz. : "SEC. 109. Exempt Transactions. The following shall be exempt from the value-added tax: xxx xxx xxx (K) Transactions which are exempt under international agreements to which the Philippines is a signatory or under special laws, except those under Presidential Decree No. 529;" In connection thereto, Section 10, Article III of the Convention on the Privileges and Immunities of the Specialized Agencies of the United Nations (UN Convention) provides, viz. : "Article III PROPERTY, FUNDS AND ASSETS Section 10 While the specialized agencies will not, as a general rule, claim exemption from excise duties and from taxes on the sale of movable and immovable property which form part of the price to be paid, nevertheless when the specialized agencies are making important purchases for official use of property on which such duties and taxes have been charged or chargeable, States parties to this Convention will, whenever possible, make appropriate administrative arrangements for the remission or return of the amount of duty or tax." Relative thereto, Section 1 (f), Article I of the same UN Convention provides: ''Article I DEFINITION AND SCOPE Section 1 In this Convention: (i) . . . (ii) The words "specialized agencies" mean: xxx xxx xxx (f) The International Bank for Reconstruction and Development; xxx xxx xxx" Based on the above provisions of the UN Convention, the International Bank for Reconstruction and Development (the World Bank Group) is a specialized agency of the United Nations. DHCSTa Moreover, International Bank for Reconstruction and Development (IBRD) Articles of Agreement particularly Article VII, Section 9 provides, viz. : "SECTION 9. Immunities from Taxation. (a) The Bank, its assets, property, income and its operations and transactions authorized by this Agreement, shall be immune from all taxation and from all customs duties. The Bank shall also be immune from liability for the collection or payment of any tax or duty." In view of all the foregoing, this Office is of the opinion and so holds that the herein local purchase of one (1) unit Toyota Hi-Ace Commuter Van 2.5 DSL, for the official use of The World Bank, is exempt from VAT pursuant to Section 109 (K) of the NIRC of 1997, the UN Convention and the IBRD Articles of Agreement. (BIR Ruling No. DA-ITAD-55-08 dated 22 July 2008) It is hereby understood that this exemption applies only to vehicles purchased under the name of The World Bank for its official use. 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, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service