Guidelines in the Treatment of Creditable Withholding Taxes (CWTs)

November 22, 2007 DA ITAD BIR RULING NO. 116-07 Sec. 106 & 108 of the Tax Code 1997; Article 34, Vienna Convention on Diplomatic Relations; BIR Ruling No. DA-ITAD-19-04 Embassy of Australia 23rd Floor, Yuchengco Tower, RCBC Plaza, 6819 Ayala Ave. cor. Sen. Gil Puyat Ave., Makati City Attention: Mr. Brian Holloway Second Secretary Gentlemen : This has reference to your Note No. 394/07 and File No. MN94/00110 dated September 28, 2007 referred to this Office by the Department of Finance and the Department of Foreign Affairs, requesting for the exemption from payment of ad valorem and value-added taxes (VAT) on the local purchase of one (1) unit motor vehicle for the official use of the Embassy of Australia specifically described as follows: Type of Use: Official Make: Toyota Previa (STD) 2.4L A/T Model Year: 2007 Color: Silver Metallic Frame Number: JTEGD54MX0A003250 Engine Number: 2AZ2775921 In reply, please be informed that Article 34 of the Vienna Convention on Diplomatic Relations reads: cCHITA "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" Thus, the tax exemption privilege of an Embassy and its diplomatic agents does not include exemption from 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 value-added tax prescribed under Sections 106 and 108 of the National Internal Revenue Code of 1997. aSCHcA However, applying the principle of reciprocity, this Office may confirm the exemptions to the Embassy of Australia and/or its personnel on their local purchases of goods and/or services it appearing from the list submitted by the Department of Foreign Affairs as of August 24, 2007, that your Government allows similar exemptions to Philippine Embassy and/or its personnel on their purchase of locally-assembled motor vehicles thereat. Hence, the local purchase of one (1) unit of 2007 Toyota Previa (STD) 2.4L A/T for the official use of the Embassy of Australia is exempt from VAT and ad valorem taxes. (BIR Ruling No. ITAD-19-04 dated February 23, 2004) 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. THESAD Very truly yours, (SGD.) GREGORIO V. CABANTAC Deputy Commissioner