Embassy of the Republic of Palau

January 24, 2023 ITAD BIR RULING NO. 003-23 Principle of Reciprocity Embassy of the Republic of Palau 10th Floor, Unit 10-D, Salcedo Village 1227 Makati City Gentlemen : This refers to your Note No. 054/ERP-PHL/2022 dated November 30, 2022 which was forwarded by the Department of Foreign Affairs, Office of Protocol (DFA-OP) on December 20, 2022. The DFA-OP recommended for the issuance of a ruling in favor of the Embassy of the Republic of Palau (the Embassy) and its qualified personnel in the Philippines confirming their exemption privileges on local purchase of goods and services on a reimbursement basis. In reply, please be informed that while the Vienna Convention on Diplomatic Relations of 1961 exempts diplomatic missions ( i.e. , embassies and consulates) and their diplomatic agents from all dues and taxes, personal or real, national, regional or municipal, they are, however, subject to the indirect taxes of a kind which are normally incorporated in the price of goods or services ( e.g. , VAT). Nevertheless, under the principle of reciprocity, this Office may grant tax privileges to a foreign embassy and to its members on their local purchases of goods and services in the Philippines, provided that it can submit to the Commissioner of Internal Revenue a certification regarding its tax regime supported by a copy of the relevant administrative rule, national or local law, or any other state policy granting tax exemptions to diplomatic missions in its country. HTcADC As per the Certification issued on November 30, 2022, the Embassy confirmed that the Government of the Republic of Palau accords tax exemption privileges to the accredited Diplomatic Missions and their diplomatic personnel on domestic purchases by way of reimbursement/refund of Gross Receipt Tax, which will be replaced by Palau Goods and Services Tax (PGST) effective January 1, 2023. There is no minimum and or ceiling price for a concession for PGST claims on domestic purchases or import. As a general rule, any good or service that has had PGST imposed, either on local purchase or import of goods into Palau are entitled to refund subject to appropriate applications and evidence to support a claim. Diplomatic missions and staff entitled to PGST refund must file a claim for refund within two (2) months from the date of purchase. It is anticipated that refunds would be issued within thirty (30) days from the date of approval of the said claim. The processing time is subject to change. Based on the foregoing, and considering that the local purchases of goods and services by the diplomatic missions and their diplomatic personnel in Palau are entitled to PGST refund, this Office is of the opinion as it hereby rules that, applying the principle of reciprocity, the Embassy and its diplomatic personnel in the Philippines are entitled to the same VAT exemption privileges. Accordingly, the Embassy of the Republic of Palau and its qualified diplomatic personnel are exempt from VAT on local purchase of goods and services in the Philippines by way of refund/reimbursement . CAIHTE This Bureau avails itself of this opportunity to renew to the Embassy of the Republic of Palau assurances of its highest consideration. Very truly yours, (SGD.) ROMEO D. LUMAGUI, JR. Commissioner of Internal Revenue