Embassy of Spain

December 1, 2022 ITAD BIR RULING NO. 018-22 Principle of Reciprocity Embassy of Spain 27th Floor, Equitable Bank Tower 8751 Paseo de Roxas 1226 Makati City Gentlemen : This refers to the letter of the Department of Foreign Affairs, Office of Protocol (DFA-OP) dated October 14, 2022 strongly recommending that a Value-Added Tax (VAT) Certificate (VC) be issued in favor of the Embassy of Spain and its qualified personnel, thereby shifting the mode of VAT exemption privileges from refund/reimbursement to point-of-sale basis. HTcADC In reply, 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, provided that they can submit to the Commissioner of Internal Revenue proof that the foreign government of the concerned embassy allows similar tax privileges to the Philippine Embassy or its personnel on purchases of goods or services in their country. According to the DFA-OP, the Philippine Embassy in Madrid confirms that the refund claims in Spain are processed consistently and efficiently within ninety (90) days from the submission of refund requests to the release of actual funds, and only copies of the official receipts are submitted for the requests. Moreover, based on the DFA VAT Matrix as of September 5, 2022, the grant of VAT exemption privileges on the purchases of the Philippine post in Madrid are subject to the following limitations: 1. FOR THE EMBASSY a) Goods for official use; b) Office supplies, provided the total cost of each invoice exceeds EUR300.51; c) Utilities and services (water, gas, electricity and fuel supply, telephone, radio and telegraphic communication services provided to the premises of the embassy); d) Real Estate (delivery and lease of buildings or parts thereof and adjoining land, purchased or leased by foreign States to be used as headquarters of the diplomatic mission or consular post or the residence of the Head of Mission or Head of Consular Post provided that he/she is a career consular officer). CAIHTE 2. FOR THE DIPLOMATIC PERSONNEL a) Goods for personal use (excluding utilities and services) with a minimum amount of EUR240.40 of purchase per invoice and a maximum amount of EUR9,015.18 per quarter of the year; b) Utilities and services provided to the residence of the head of mission or head of consular post (water, gas, electricity and fuel supply, telephone, radio and telegraphic communication services), provided the invoice amount exceeds EUR240.40 and the contract is in the name of the head of mission/consular post. Based on the foregoing, and considering the efficient processing of VAT refund claims in Spain, this Office is of the opinion as it hereby rules that, applying the principle of reciprocity, the Embassy of Spain in the Philippines is entitled to the same VAT exemption privileges at point-of-sale subject only to the aforementioned limitations. Meanwhile, its qualified diplomatic personnel are entitled to VAT exemption on purchase of goods only through reimbursement/refund since the Revenue District Office of the Bureau has to monitor the amount of VAT refund that may be allowed for each calendar quarter. Per the DFA VAT Matrix, diplomatic personnel may be allowed to claim VAT refund if the amount of purchase per invoice exceeds EUR240.40. However, only the cumulative quarterly purchases amounting to EUR9,015.18 shall be entitled to VAT refund. Accordingly, the Embassy of Spain and its qualified Head of Mission shall be issued with VAT Certificates for their local purchases in the Philippines subject to the aforementioned limitations. This ruling amends and supersedes BIR Ruling No. ITAD-031-19 dated October 14, 2019. Very truly yours, (SGD.) ROMEO D. LUMAGUI, JR. Commissioner of Internal Revenue