ITAD BIR Ruling No. 009-13

January 22, 2013 ITAD BIR RULING NO. 009-13 Sec. 109 (K), NIRC of 1997, as amended; Paragraph 4 (a), May 6, 2002 Diplomatic Exchange of Notes; Art. 5, Agreement between the Government of the Federal Republic of Germany and the Government of the Republic of the Philippines Concerning Technical Co-operation Embassy of the Federal Republic of Germany 25th Floor, The RCBC Plaza, Tower 2 6819 Ayala Avenue, Makati City Attention: Ansgar Kremnitzer Attach Gentlemen : This refers to your Note Verbale No. 94-2012 dated November 20, 2012 indorsed to this Office by the Department of Finance (DOF) and the Department of Foreign Affairs (DFA), Office of Protocol, requesting exemption from value-added tax (VAT) on the local purchase of a motor vehicle for the official use of the Deutsche Gesellschaft fr Internationale Zusammenarbeit (GIZ) , GIZ Office, Manila, specifically described as follows: Organization : Deutsche Gesellschaft fr Internationale Zusammenarbeit (GIZ), GIZ Office, Manila Type of use : Official use for the "Environment and Rural Development Program" of the GIZ Make : one (1) unit Toyota Hi-Lux 4x4 3.0 DIESEL MT Model year : 2013 Color : Freedom White Engine No. : 1KD5901659 Frame No. : MR0FZ29G701668658 It is represented that GIZ is the new name of Deutsche Gessellschaft fr Technische Zusammenarbeit (GTZ) effective January 1, 2011, per Note No. 275/10 dated December 1, 2010 of the Embassy of the Federal Republic of Germany and DFA Note No. 11-0197 dated January 31, 2011; that the renaming of GTZ as GIZ is part of Germany's technical cooperation reform with the intention of increasing its efficiency and effectiveness by unifying structures and processes under a single agency; that as of January 1, 2011, the German Development Service (DED) and InWEnt-Capacity Building International, Germany, will also be merged with the GIZ, which will continue the work of those two (2) organizations; that from the start of 2011, there will thus only be named the "Deutsche Gessellschaft fr Technische Zusammenarbeit" (GIZ); and that the said change of name shall have no effect on the existing arrangements and ongoing projects. ADHaTC In reply, please be informed that Section 109 of the National Internal Revenue Code (NIRC) of 1997, as amended, provides, viz. : "SEC. 109. Exempt Transactions . Subject to the provisions of Subsection (2) hereof, the following transactions shall be exempt from the 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;" Based on the foregoing, a transaction is exempt from VAT when a special law or an international agreement to which the Philippines is a signatory provides for such exemption. The Agreement between the Government of the Federal Republic of Germany and the Government of the Republic of the Philippines Concerning Technical Co-operation (Technical Co-operation Agreement) executed on September 7, 1971, together with the Diplomatic Exchange of Notes dated May 6, 2002 approving the Arrangement for the continuation of the GTZ Office in Manila, partakes the nature of an international agreement as provided in Section 109 (K) of the NIRC of 1997. Paragraph 4 (a) of the aforementioned Diplomatic Exchange of Notes is, in effect, a grant of exemption from VAT. It provides: "4. The Government of the Republic of the Philippines shall make the following contributions: It shall (a) exempt the material and motor vehicles supplied for the Office from taxes, licenses, harbour dues, import and export duties and other public charges, as well as storage fees, and ensure that such material is cleared by customs without delay. The aforementioned exemptions shall, with regard to value-added tax (VAT), also apply to material and services (including consulting services) procured in the Republic of the Philippines, as well as to the renting of office premises and accommodation for seconded experts;" (Underscoring ours) EcAISC In view thereof, this Office grants the herein request for exemption from VAT on the local purchase of a 2013 Toyota Hi-Lux 4x4 3.0 Diesel MT for the official use of the Environment and Rural Development Program of the GIZ pursuant to the aforementioned Technical Co-operation Agreement, Diplomatic Exchange of Notes and Section 109 (K) of the NIRC of 1997, as amended. Accordingly, the sale of the above motor vehicle by the local car dealer to GIZ, being a tax-exempt entity, shall be subject to VAT at zero-percent (0%) rate pursuant to Section 106 (A) (2) (c) of the NIRC of 1997, as amended. 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