The World Bank/International Bank

May 26, 2022 ITAD BIR RULING NO. 023-22 Sec. 106 (A) (2) (c), Tax Code; Article III, Section 10, SA Convention The World Bank/International Bank for Reconstruction and Development 26th Floor, One Global Place 25th Street, Bonifacio Global City 1634 Taguig City Attention: ____________________ Country Director Gentlemen : This refers to your letter dated April 29, 2022 indorsed to this Office by the Department of Finance (DOF) and the Department of Foreign Affairs (DFA), requesting exemption from value-added tax (VAT) and ad valorem tax on the local purchase of one (1) unit of motor vehicle, for the official use of the World Bank/International Bank for Reconstruction and Delivery (IBRD), specifically described as follows: MAKE YEAR COLOR FRAME NUMBER ENGINE NUMBER Toyota Camry 2.5L V HEV CVT 1G 2022 Attitude Black Mica MR2B53HK6N4012406 A25A-1032248 Under Section 1, Article I, of the Convention on the Privileges and Immunities of the Specialized Agencies of the United Nations 1 (SA Convention), the IBRD is a specialized agency of the United Nations (UN). Being so, its property, funds and assets are governed by the provisions of the SA Convention, specifically Section 10, Article III thereof, to wit: " Article III PROPERTY, FUNDS AND ASSETS xxx xxx xxx 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 forms 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 are 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." Applying the above provisions, the IBRD may be entitled to a possible remission or return of the amount of duty or tax paid on its purchases provided the property acquired is for its official use. Accordingly, any motor vehicle to be purchased locally for the official use of the IBRD shall be exempt from the payment of any tax imposed on its acquisition of such property. Moreover, pursuant to Section 106 (A) (2) (b) of the National Internal Revenue Code of 1997 (Tax Code), as amended, sales of goods by VAT-registered sellers to persons or entities whose exemption under special laws or international agreements to which the Philippines is a signatory effectively subjects such sales to zero rate, are subject to VAT at zero percent (0%) rate, thus: "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 twelve percent (12%) 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 transferor. xxx xxx xxx (2) The following sales by VAT-registered persons shall be subject to zero percent (0%) rate: xxx xxx xxx (b) Sales to persons or entities whose exemption under special laws or international agreements to which the Philippines is a signatory effectively subjects such sales to zero rate." Accordingly, the sale of one (1) unit 2022 Toyota Camry 2.5L V HEV CVT 1G by the VAT-registered local car dealer to the IBRD for the latter's official use shall be subject to VAT at zero-percent (0%) rate. Such sale shall likewise be exempt from ad valorem tax pursuant to Section 9 of Revenue Regulations No. 25-2003. This ruling is issued on the basis of the facts as represented. However, if it will be disclosed upon investigation 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, Commissioner of Internal Revenue By: (SGD.) LARRY M. BARCELO Assistant Commissioner Legal Service Footnotes 1. The Philippines is a party to the SA Convention and has formally acceded thereto on March 30, 1950.