ITAD BIR Ruling No. 002-11

January 19, 2011 ITAD BIR RULING NO. 002-11 Section 109 of the National Internal Revenue Code of 1997; Section 10, Article III, Vienna Convention on the Privileges and Immunities of the Specialized Agencies of the United Nations; BIR Ruling No. ITAD-054-10 United Nations Development Programme (UNDP) 30th Floor, Yuchengco Tower, RCBC Plaza 6819 Ayala Avenue cor. Sen. Gil Puyat Ave. Makati City, Philippines Gentlemen : This has reference to your letter dated November 2, 2010 indorsed 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 for the exemption from payment of value-added tax (VAT) on the local purchase of one (1) motor vehicle, for the official use of the United Nations Development Programme (UNDP), specifically described as follows: aIAcCH Make: One (1) unit Toyota Innova G M/T Diesel Model Year: 2010 Chassis No.: KUN40-5032470 Engine No.: 2KD-6386906 In reply, please be informed that Section 106 (A) (2) (c) of the National Internal Revenue Code (NIRC) of 1997, as amended, provides as follows: SEC. 106. Value-Added Tax on Sale of Goods or Properties. (A) Rate and Base of Tax. There shall be levied, assessed and collected on every sale, barter or exchange of goods or properties, value-added tax equivalent to ten percent (10%) of the gross selling price or gross value in money of the goods or properties sold, bartered or exchanged, such tax to be paid by the seller or transferor. xxx xxx xxx (2) The following sales by VAT-registered persons shall be subject to zero percent (0%) rate: xxx xxx xxx (c) Sales to persons or entities whose exemption under special laws or international agreements to which the Philippines is a signatory effectively subjects such sales to zero rate. In relation thereto, Section 10, Article III and Section 1 (ii) (j), Article I, of the Convention on the Privileges and Immunities of the Specialized Agencies of the United Nations dated November 21, 1947 provides: "Article III PROPERTY, FUNDS AND ASSETS xxx xxx xxx Section 10 While the specialized agencies will not, as a general rule, claim exemption from excise duties and from taxes on the sale of movable and immovable property which form part of the price to be paid, nevertheless when the specialized agencies are making important purchases for official use of property on which such duties and taxes have been charged or chargeable, States parties to this Convention will, whenever possible, make appropriate administrative arrangements for the remission or return of the amount of duty or tax. ACTISE Article I DEFINITION AND SCOPE Section 1 In this Convention: (ii) The words 'specialized agencies' mean: xxx xxx xxx (j) Any other agency in relationship with the United Nations in accordance with Articles 57 and 63 of the Charter;" In view of the foregoing, and since UNDP is a specialized agency of the United Nations, the subject purchase by UNDP for its official use of one (1) unit of Toyota Innova G M/T Diesel Model 2010 is effectively subject to VAT but at a zero percent rate. (BIR Ruling No. DA-ITAD-054-10 dated October 18, 2010). 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