Her Britannic Majesty's Embassy

June 20, 2019 ITAD BIR RULING NO. 018-19 Sections 109 (K), 106 (A) (2) (b) and 108 (B) (3), Tax Code, as amended; Articles 1 & 23, Vienna Convention Her Britannic Majesty's Embassy 120 Upper McKinley Road, McKinley Hill 1634 Taguig City, Metro Manila Attention: AAA _______________ Gentlemen : This refers to your Note No. 19-090 dated 01 May 2019 requesting for the issuance of a confirmatory ruling on the exemption of Her Britannic Majesty's Embassy from the payment of taxes in respect of its premises pursuant to Article 23 of the Vienna Convention on Diplomatic Relations of 1961 (Vienna Convention). In reply, please be informed that transactions involving real properties are generally subject to taxes under various provisions of the National Internal Revenue Code (Tax Code) of 1997, as amended, depending on the type of transaction. However, as regards income tax, Section 32 (B) (5) of the Tax Code of 1997, as amended, states that "x x x exempt from income tax are income of any kind to the extent required by any treaty obligation binding upon the Government of the Republic of the Philippines." With regard to value-added tax (VAT), Sections 106 (A) (2) (b) and 108 (B) (3) of the Tax Code of 1997, as amended, provide that sales and services rendered to persons or entities who are exempt under international agreements to which the Philippines is a signatory are subject to zero-rated VAT. Moreover, transactions which are exempt under international agreements to which the Philippines is a signatory, are exempt from VAT under Section 109 (K) of the same Tax Code. In connection thereto, the Philippines, being a signatory to the Vienna Convention, is bound by its provisions. In this regard, Article 23 (1) of the Vienna Convention provide: "Article 23 1. The sending State and the head of the mission shall be exempt from all national, regional or municipal dues and taxes in respect of the premises of the mission ,whether owned or leased, other than such as represent payment for specific services rendered. x x x" (Underscoring ours) Based on the above provision, exemption from all national taxes is accorded to the sending State (the British Government, thru its embassy in the Philippines),in respect of the premises of the embassy, whether owned or leased. In view of the foregoing, this Office is of the opinion and hereby confirms that transactions in respect of Her Britannic Majesty's Embassy premises are exempt from all national taxes .Moreover, purchase of goods and services in respect of the embassy premises are subject to VAT at zero percent rate , pursuant to Article 23 (1) of the Vienna Convention, in relation to Sections 32 (B) (5), 106 (A) (2) (b), 108 (B) (3) and 109 (K) of the Tax Code of 1997, as amended. However, exemption from the payment of regional or municipal dues and taxes is beyond the jurisdiction of this Bureau. In this light, inquiry may be directed to the Bureau of Local Government Finance. 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.) CAESAR R. DULAY Commissioner of Internal Revenue