ITAD BIR Ruling No. 023-10

August 27, 2010 ITAD BIR RULING NO. 023-10 Art. 109 (q) Tax Code Art. 2, Agreement Between the Republic of the Philippines & Intergovernmental Committee for Migration; BIR Ruling No. ITAD-013-03; BIR Ruling No. DA-ITAD-216-02 International Organization for Migration Regional Office for East and Southeast Asia Units G & H, 25th Floor Citibank Tower Condominium Paseo de Roxas, Makati City Attention: Bruce Reed Regional Representative Gentlemen : This refers to your letter dated May 20, 2010, invoking the November 21, 1947 Convention on the Privileges and Immunities of the United Nations Specialized Agencies, 1 in relation to the request for the issuance of value added tax exemption certificates ("VEC") in favor of your officials, Mr. Detlev Mehlis and Mr. Bo Amstrom, and their respective dependents. In reply, Section 109 (q) of the Tax Code of 1997 provides: "Sec. 109. Exempt Transactions. The following shall be exempt from the value-added tax: xxx xxx xxx (q) Transactions which are exempt under international agreements to which the Philippines is a signatory or under special laws, except those under Presidential Decree Nos. 66, 529 and 1590; xxx xxx xxx." In turn, Article 2 of the Agreement entered between the Government of the Republic of the Philippines and Intergovernmental Committee for Migration (presently IOM) the relevant provision of the agreement states as follows: "Article 2 1. Unless otherwise provided in this Agreement, the Committee, including its property, funds and assets, shall enjoy in the Philippines the same privileges and immunities as those granted to specialized agencies of the United Nations by virtue of the Convention on the privileges and immunities of the specialized agencies of 21 November 1947 and of Philippine laws and regulations, governmental decrees and ministerial instructions pertaining to this matter." THESAD Relevant to the above, the Convention on the Privileges and Immunities of the Specialized Agencies of the United Nations (UN Convention), provides as follows: "Section 4 The specialized agencies, their property and assets, wherever located and by whomsoever held, shall enjoy immunity from every form of legal process except in so far as in any particular case they have expressly waived their immunity. It is, however, understood that no waiver of immunity shall extend to any measure of execution." "Section 10 While the specialized agencies will not, as a general rule, claim exemption from excise duties and from taxes on the sale of movable and immovable property which form part of the price to be paid, nevertheless when the specialized agencies are making important purchases for official use of property on which such duties and taxes have been charged or chargeable, States parties to this Convention will, whenever possible, make appropriate administrative arrangements for the remission or return of the amount of duty or tax." Clearly, Section 10 of the UN Convention requires that to be entitled to a "possible . . . remission or return of the amount of duty or tax," the subject purchases must be for official use of the specialized agency. Inasmuch as the herein request is for a VEC in favor of IOM's officials and their dependents, we regret to inform you that the request for exemption from VAT is hereby DENIED for lack of legal basis (BIR Ruling No. ITAD-013-03 dated January 27, 2003). Finally, please be informed that official requests for exemption should be first coursed through the Department of Foreign Affairs for proper endorsement to the Bureau of Internal Revenue. 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. aDACcH Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue Footnotes 1. Approved by the General Assembly of the United Nations in November 21, 1947.