Mr. Jerril G. Santos

February 2, 2018 ITAD BIR RULING NO. 011-18 Section 106 (A) 1997 NIRC; Revenue Regulations No. 25-2003 Mr. Jerril G. Santos Assistant Secretary, Office of Protocol Department of Foreign Affairs 2330 Roxas Blvd., Pasay City Dear Assistant Secretary Santos, This refers to the 02 July 2013 letter of Mr. Veredigno P. Atienza, General Manager of the Philippine Retirement Authority (PRA), forwarded to this Bureau for appropriate action, requesting information on issues in connection with the motor vehicle privileges of members of foreign missions and international organizations who opt to retire in the Philippines through the Special Resident Retiree's Visa Program of the PRA, to wit: IDSEAH 1. Whether or not the above-mentioned officials can retain the tax-exempt motor vehicle acquired by them during their tours of duty in the Philippines; and 2. Whether or not the retained motor vehicle is exempt from duties and taxes upon conversion of the diplomatic or other exempt vehicles (OEV) plate to regular plate. In reply, please be informed that a diplomat of a foreign mission/international organization, whose function has ended and whose diplomatic status has reverted to the status of an ordinary individual, who (if their mission contracts so allow) chooses to retain a motor vehicle originally issued to him as exempt/zero-rated, must pay the necessary excise and value-added taxes (VAT) before the vehicle is issued a regular plate and registered to him. The effect of the change in his status is the same as the transfer of a motor vehicle from a privileged to a non-privileged buyer. Thus, Section 106 (A) of the amended 1997 National Internal Revenue Code (NIRC) on VAT, and, Section 8 of Revenue Regulations (RR) No. 25-2003 on excise tax, provide, as follows: "SEC. 106. Value-Added Tax on Sale of Goods or Properties. (A) Rate and Base of Tax. There shall be levied, assessed and collected on every sale, barter or exchange of goods or properties, a value-added tax equivalent to ten percent (10%) 1 of the gross selling price or gross value in money of the goods or properties sold, bartered or exchanged, such tax to be paid by the seller or transferors: Provided, That the President, upon the recommendation of the Secretary of Finance, shall, effective January 1, 2006, raise the rate of value-added tax to twelve percent (12%) after any of the following conditions has been satisfied: x x x" "SEC. 8. TAX TREATMENT ON SUBSEQUENT SALE, TRANSFER OR EXCHANGE OF TAX-EXEMPT AUTOMOBILE BY A TAX-EXEMPT PERSON/ENTITY TO A NON-EXEMPT PERSON/ENTITY. In cases where a tax-exempt person/entity acquired an automobile, whether locally purchased or imported, without payment of the tax by reason of his/their exemption, the purchase thereof by a non-exempt person/entity shall be subjected to the ad valorem tax based on the higher of (i) actual consideration between the tax-exempt person/entity and the non-exempt person/entity; or (ii) the depreciated value of the automobile at the time of sale, transfer, or exchange which depreciation rate shall be at ten percent (10%) per year, but in no case shall the total amount of depreciation be more than fifty percent (50%) of the original cost or value. xxx xxx xxx" In view thereof, members of foreign missions and international organizations who opt to retire in the Philippines through the Special Resident Retiree's Visa Program of the PRA may retain the motor vehicles originally issued to them as exempt/VAT zero-rated, if their mission contracts so allow. However, the said members of foreign missions and international organizations are subject to the payment of the necessary VAT and excise taxes pursuant to Section 106 (A) of the NIRC and Section 8 of RR No. 25-2003, respectively. This Office declines to pass upon the issue on duties as it is within the appropriate jurisdiction of the Philippine Bureau of Customs to rule upon. It is hoped that we have assisted you with your inquiries. aCIHcD Very truly yours, (SGD.) CAESAR R. DULAY Commissioner of Internal Revenue Footnotes 1. The VAT rate was increased to 12 percent on February 1, 2006, in accordance with the Memorandum of the Executive Secretary to the Secretary of Finance dated January 31, 2006, as circularized by Revenue Memorandum Circular No. 7-2006 (Publishing the Full Text of the Memorandum from Executive Secretary Eduardo R. Ermita dated January 31, 2006 Approving the Recommendation of the Secretary of Finance to Increase the Value Added Tax Rate from Ten Percent to Twelve Percent) dated January 31, 2006.