Principle of Reciprocity Embassy of the Republic of Panama

May 3, 2023 ITAD BIR RULING NO. 009-23 Principle of Reciprocity Embassy of the Republic of Panama Units 1702-1703, Panorama Tower 34th Street corner Lane A, Bonifacio Global City 1635 Taguig City Gentlemen : This refers to your Note Verbale dated March 1, 2023 concerning the value-added tax (VAT) exemption of the Embassy of the Republic of Panama (the Embassy) and its qualified personnel in the Philippines. The request was forwarded by the Department of Foreign Affairs, Office of Protocol with a recommendation for the issuance of VAT Certificates in favor of the Embassy, its accredited diplomatic and consular officers and administrative and technical staff for their enjoyment of VAT exemption privileges on local purchases of goods and services at point-of-sale. Relative thereto, 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. In its letter dated March 1, 2023, the Embassy clarified that pursuant to the laws and regulations 1 of the Republic of Panama, foreign Diplomatic Missions (DMs) and their diplomatic personnel are accorded VAT exemption (Impuesto de Transferencis de Bienes Muebles y Prestacin de Servicios or ITBMS, in Panama) on their purchases in Panama by presenting their Diplomatic Identification Card for the ITBM (Carnt de Identificacin Diplomtico) . The Diplomatic Identification Card for the ITBM is issued by the Ministry of Foreign Affairs of the Republic of Panama. VAT exemption is given at each point-of-sale to all accredited Diplomatic and Consular Missions and Diplomatic and Consular Officers, including Administrative and Technical Staff by presenting the ITBMS Tax Exemption Card (Carn de Exencin de Impuesto ITBMS) when purchasing goods and services. Likewise, DMs also receive tax exemption on their official purchases through an ITBMS exemption certificate, which is renewed every year. AScHCD Based on the foregoing, and considering that the local purchases of goods and services by DMs and their accredited personnel in Panama are accorded with VAT exemption at point-of-sale, this Office is of the opinion as it hereby rules that, applying the principle of reciprocity, the Embassy, its accredited personnel in the Philippines are entitled to the same VAT exemption privileges. Accordingly, the Embassy of the Republic of Panama and its accredited personnel will be issued with VAT Certificates for their enjoyment of VAT exemption on local purchase of goods and services at point-of-sale. This Bureau avails itself of this opportunity to renew to the Embassy of the Republic of Panama assurances of its highest consideration. Very truly yours, (SGD.) ROMEO D. LUMAGUI, JR. Commissioner of Internal Revenue Footnotes 1. Decreto de Gabinete No. 208; Resolucin No. 201-5090.