ITAD BIR Ruling No. 005-10

April 15, 2010 ITAD BIR RULING NO. 005-10 Sections 106 & 108, NIRC of 1997; Article 34, Vienna Convention on Diplomatic Relations Embassy of the Federative Republic of Brazil 16th Floor, Liberty Center Building 104 H.V. de la Costa Street Salcedo Village, Makati City Attention: H.E. Alcides G.R. Prates Ambassador Gentlemen : This has reference to your Note Verbale No. 018/10 dated March 5, 2010, referred 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 exemption from payment of value-added tax (VAT) on the purchase of one (1) motor vehicle, for the official use of the Embassy of the Federative Republic of Brazil, specifically described as follows: HcaDTE Make: Toyota Camry 3.5 Q A/T Year Model: 2010 Color: Xtreme Black Chassis No.: MR053KK4007002439 Engine No.: 2GR0714838 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; . . . . " (Emphasis supplied) Thus, the tax exemption privilege of an Embassy and its diplomatic agents does not include exemption from VAT, which is an indirect tax, 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, both of the National Internal Revenue Code of 1997 (NIRC of 1997), as amended. However, applying the principle of reciprocity, this Office may confirm the VAT exemption of the Embassy of the Federative Republic of Brazil and/or its personnel on their local purchase of motor vehicles it appearing from the list submitted by the DFA dated February 10, 2009, that the Brazilian government allows similar exemption to the Philippine Embassy and/or its personnel on their local purchases of motor vehicles thereat. Hence, the local purchase of one (1) unit 2010 Toyota Camry 3.5 Q A/T for the official use of the Embassy of the Federative Republic of Brazil is exempt from VAT on the basis of reciprocity. 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. aHSTID Very truly yours, (SGD.) JOEL L. TAN-TORRES Commissioner of Internal Revenue