ITAD BIR Ruling No. 007-09

March 3, 2009 ITAD BIR RULING NO. 007-09 Secs. 106 & 108 of the NIRC of 1997; Article 34, Vienna Convention on Diplomatic Relations; BIR Ruling No. ITAD 041-07 Royal Embassy of Cambodia Unit 7 A-B/7th Floor, Country Space One Bldg. Senator Gil Puyat Avenue Makati City Gentlemen : This has reference to your Note Verbal No. 267/08 dated December 9, 2008, referred to this Office by the Immunities and Privileges Division, Office of Protocol and State Visits of the Department of Foreign Affairs (DFA), requesting for the issuance of value-added tax (VAT) exemption certificate to your Embassy. ISDHEa 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 the goods and services; xxx xxx xxx." (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 an Embassy of goods and/or services shall, in general, be subject to the VAT prescribed under Sections 106 and 108 of the National Internal Revenue Code of 1997, as amended. However, applying the principle of reciprocity, this Office may confirm entitlement to VAT exemption of the Embassy of Cambodia and/or its personnel on their local purchases of goods and/or services if it appears from the list submitted by the DFA that the Government of Cambodia allows similar exemption to the Philippine Embassy and/or its personnel on their purchase of goods and services in Cambodia. It appears from the list submitted by DFA dated January 2009 that the Royal Embassy of Cambodia is one of the embassies entitled to VAT exemption on its local purchase of goods and services in the Philippines on the basis of reciprocity. Hence, the Royal Embassy of Cambodia and/or its personnel is exempt from VAT on its purchases of basic goods and/or services in the Philippines. IcDCaT 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.) SIXTO S. ESQUIVIAS IV Commissioner of Internal Revenue