DA ITAD BIR Ruling No. 154-06

December 13, 2006 DA ITAD BIR RULING NO. 154-06 Sec 106 & 108 of the National Internal Revenue Code of 1997; Article 34, Vienna Convention; VAT Ruling No. 006-97 Embassy of Canada 8/F Tower 2, RCBC Plaza 6819 Ayala Avenue, Makati City Gentlemen : This has reference to your Note No. 0308/06 dated October 23, 2006, referred to this Office by the Department of Finance (DOF) and the Office of Protocol, Department of Foreign Affairs (DFA), requesting for a tax-free purchase on a local motor vehicle for the official use of the Embassy of Canada, specifically described as follows: Make: Toyota GL Grandia 2.5 Diesel M/T Model Year: 2006 Color: Dark Gray Mica Engine Number: 2KD-1520781 Frame Number: JTFRS13P9-00003826 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 goods or services: cETDIA "xxx xxx xxx" Thus, the tax exemption privilege of an Embassy and its diplomatic agents does not include exemption from the value-added tax (VAT) 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. However, applying the principle of reciprocity, this Office may grant exemptions to the Embassy of Canada in its local purchases of goods and/or services it appearing from the list submitted by the Department of Foreign Affairs as of October 18, 2005 that your Government allows similar exemption to the Philippine Embassy on its purchases of goods and services in your country. Hence, the herein local purchase of one (1) Toyota GL Grandia 2.5 Diesel M/T for the official use of the Embassy of Canada is exempt from VAT. (BIR Ruling No. ITAD 23-99 dated August 30, 1999) Very truly yours, (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service