DA ITAD BIR Ruling No. 109-10

December 28, 2010 DA ITAD BIR RULING NO. 109-10 Sections 106 & 108 of the National Internal Revenue Code of 1997; Article 34, Vienna Convention on Diplomatic Relations; BIR Ruling No. DA-ITAD-024-01 Embassy of Australia Level 23 Tower 2, RCBC Plaza 6819 Ayala Avenue, Makati City Attention: Mr. Hugh David Wilson Counsellor and Consul General Gentlemen : This has reference to your Note Verbale No. 344-10 dated October 29, 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) and ad valorem tax on the purchase of a second hand, previously imported, and tax exempted motor vehicle, for the personal use of Mr. Hugh David Wilson, Counsellor and Consul General, from Ms. Colleen Sheila Steward, First Secretary, both of the Embassy of Australia, specifically described as follows: Type of Use: Personal Make: 2004 Honda CRV Chassis No.: PADRD58503V100326 Engine No.: PRLD65-3100256 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 : AcICHD (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 VAT and ad valorem tax, 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 VAT under Sections 106 and 108, and ad valorem tax under Section 149, of the National Internal Revenue Code of 1997 (NIRC of 1997), as amended. However, applying the principle of reciprocity, this Office may confirm the exemption from VAT and ad valorem tax of the Embassy of Australia 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 Australia allows similar exemption to the Philippine Embassy in Australia 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 exempt from VAT and ad valorem tax, the purchase of one (1) unit of 2004 Honda CRV of Mr. Hugh David Wilson from Ms. Colleen Sheila Steward, both of the Embassy of Australia, for the personal use of Mr. Wilson continues to be exempt from VAT. (BIR Ruling No. ITAD-024-01 dated March 12, 2001) 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