DA ITAD BIR Ruling No. 114-09

December 29, 2009 DA ITAD BIR RULING NO. 114-09 Secs. 106 and 108, NIRC of 1997, as amended; Article 34, Vienna Convention on Diplomatic Relations; BIR Ruling No. DA-ITAD-101-09 Embassy of Canada 8/F Tower 2, RCBC Plaza 6819 Ayala Avenue, Makati City Attention: Ms. Micheline Aucoin Minister-Counsellor Gentlemen : This has reference to your Note No. 0251/09 dated 19 October 2009 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 Ms. Micheline Aucoin, Minister-Counsellor of the Embassy of Canada from Ms. Marzia Mongiorgi, Senior Rural Development Economist of the Asian Development Bank, specifically described as follows: Make: Honda CRV 2.0 A/T Model Year: 2000 Color: Ruby Red Engine Number: PEWD7-Y306423 Chassis Number: PADRD 1830YV206427 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 : (a) indirect taxes of a kind which are normally incorporated in the price of the goods and services; xxx xxx xxx." (Emphasis 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 Canada and/or its personnel on their purchase of motor vehicles it appearing from the list submitted by the DFA dated 10 February 2009 that the Government of Canada allows similar exemption to the Philippine Embassy and/or its personnel on their purchase of motor vehicles in Canada. Hence, since the transferor and the transferee of the subject motor vehicle are VAT exempt individuals, the sale of one (1) unit 2000 Honda CRV 2.0 A/T by Ms. Marzia Mongiorgi to Ms. Micheline Aucoin, for the latter's personal use continues to be exempt from VAT. (BIR Ruling No. DA-ITAD-101-09 dated 20 November 2009) 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.) JAMES H. ROLDAN Assistant Commissioner Legal Service