ITAD BIR Ruling No. 001-14

January 8, 2014 ITAD BIR RULING NO. 001-14 Section 107 and Section 109 (K), National Internal Revenue Code of 1997, as amended; Article IX, Section 34 (a) of the Agreement Between the Asian Development Bank and the Government of the Republic of the Philippines Regarding the Headquarters of the Asian Development Bank; Sections 1 (d) and 6 (a) of the Supplementary Agreement to Agreement Between the Asian Development Bank and the Government of the Republic of the Philippines Asian Development Bank 6 ADB Avenue Mandaluyong City Attention: Ken Chee Director, Facilities and Asset Management Division Office of Administrative Services Gentlemen : This refers to your letter dated December 5, 2012, indorsed to this Office by the Department of Foreign Affairs, requesting for the approval of the free entry of imported items for the construction of an extension building within the ADB Headquarters site pursuant to Articles I, Section (1) (d) and III, Section (6) (a) the Supplementary Agreement to the Agreement Between the Asian Development Bank and the Government of the Republic of the Philippines Regarding the Headquarters of the ADB . In reply, please be informed that Section 107 (A) of the National Internal Revenue Code (NIRC) of 1997, as amended, provides, viz. : SEC. 107. Value-Added Tax on Importation of Goods . (A) In General. There shall be levied, assessed and collected on every importation of goods a value-added tax equivalent to ten percent (10%) based on the total value used by the Bureau of Customs in determining tariff and customs duties plus customs duties, excise taxes, if any, and other charges, such tax to be paid by the importer prior to the release of such goods from customs custody: Provided, That where the customs duties are determined on the basis of the quantity or volume of the goods, the value-added tax shall be based on the landed cost plus excise taxes, If any. However, Section 109 (K) of the same NIRC provides, viz. : prLL "SEC. 109. Exempt Transactions . (1) Subject to the provisions of Subsection (2) hereof, the following transactions shall be exempt from 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;" Relative thereto, Article IX, Section 34 (a) of the Agreement Between the Asian Development Bank and the Government of the Republic of the Philippines Regarding the Headquarters of the Asian Development Bank ("Headquarters' Agreement") signed on December 22, 1966 provides, viz. : "ARTICLE IX Property of the Bank and Taxation xxx xxx xxx Section 34. The Bank, its property and its operations and transactions shall be exempt from: (a) all taxation and any obligation for the payment, withholding or collection of any tax or duty. The Bank will not claim exemption from taxes or charges which are no more than payments for public utility services. (Emphasis supplied)" IEcaHS Moreover, Sections 1 (d) and 6 (a) of the Supplementary Agreement to Agreement Between the Asian Development Bank and the Government of the Republic of the Philippines , provide: "Article I Section 1 xxx xxx xxx (d) 'New Headquarters Premises' means the New Headquarters Site, the New Headquarters Buildings and all other structures, fixtures, furniture, and facilities (including landscape, parking and access facilities) to be located on, or to be included in, the New Headquarters Site and the New Headquarters Buildings. xxx xxx xxx Article III Assistance of the Government xxx xxx xxx Section 6 (a) The Government confirms that all materials, equipment, fixtures and furnishings to be procured by the Bank, and all transactions to be carried out by the Bank, for the construction, furnishings and maintenance of the New Headquarters Premises are exempt from all taxes, customs duties and other levies and from all prohibitions and restrictions pursuant to Article 56 of the Agreement Establishing the Asian Development Bank and Section 34 of the Headquarters Agreement." HaDEIc Based on the above, ADB is exempt from the payment of all taxes for the construction, furnishing and maintenance of the New Headquarters Premises. In this case, exemption applies to the importation of items for the construction of an extension building within the ADB Headquarters site. In view of all of the foregoing, this Office is of the opinion and so holds that the aforementioned importation of items for the construction of an extension building within the ADB Headquarters is confirmed to be exempt from value-added tax pursuant to Section 109 (K) of the NIRC of 1997, as amended and the Supplementary Agreement to Agreement Between the Asian Development Bank and the Government of the Republic of the Philippines . 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.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue