ITAD BIR Ruling No. 026-10

August 27, 2010 ITAD BIR RULING NO. 026-10 Sec. 109 of the NIRC of 1997; Section 10, Article III, Vienna Convention on the Privileges and Immunities of the Specialized Agencies of the United Nations; VAT Ruling No. 008-98; VAT Ruling No. 005-07; BIR Ruling No. DA-ITAD-046-07; BIR Ruling No. DA-ITAD-085-07; BIR Ruling No. DA-ITAD-049-09 United Nations Fund for Population Activities (UNFPA) 30th Floor, Yuchengco Tower RCBC Plaza, 6819 Ayala Avenue Makati City Gentlemen : This refers to your letter dated May 6, 2010, indorsed to this Office by the Department of Finance (DOF) and the Department of Foreign Affairs (DFA), requesting for the exemption from payment of value-added tax (VAT) on the purchase of one (1) locally-purchased motor vehicle, for the official use of the United Nations Fund for Population Activities (UNFPA), specifically described as follows: CEHcSI Make: Toyota Hi-Lux 3.0L 4X4 Diesel M/T Model Year: 2010 Color: Lithium Engine Number: 1KD6515818 Chassis Number: MR0FZ29G401587892 In reply, please be informed that Section 109 of the National Internal Revenue Code of 1997 (NIRC), as amended by Section 7 of Republic Act No. 9337 dated November 1, 2005 , provides as follows: "SEC. 109. Exempt Transactions . Subject to the provisions of Subsection (2) hereof, the following transactions shall be exempt from the value-added tax: xxx xxx xxx (K) Transactions which are exempt under international agreements to which the Philippines is a signatory or under special laws, except those under Presidential Decree No. 529;" In relation thereto, Section 10, Article III of the Convention on the Privileges and Immunities of the Specialized Agencies of the United Nations dated November 21, 1947 (UN Convention) provides: " Article I 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 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. xxx xxx xxx" The aforecited provision of the UN Convention clearly requires that to be entitled to a possible remission or return of the amount of duty or tax, the subject purchase must be for official use of the specialized agency. But in lieu of remission or return of the amount of duty or tax related to the purchase for official use, a tax exemption privilege is instead granted. 1 Such being the case, and since UNFPA is a specialized agency of the UN, this Office is of the opinion and so holds that aforementioned purchase of one (1) unit 2010 Toyota Hi-Lux 3.0L 4X4 Diesel M/T for the official use of UNFPA, is exempt from VAT. (VAT Ruling No. 008-98 dated January 1998; BIR Ruling No. DA-ITAD-046-07 dated 11 April 2007; VAT Ruling No. 005-07 dated 19 April 2007; BIR Ruling No. DA-ITAD-085-07 dated 19 July 2007; BIR Ruling No. DA-ITAD-049-09 dated 28 April 2009) aHIEcS It is hereby understood that this exemption applies only to vehicles purchased under the name of United Nations Fund for Population Activities for its official use. This ruling is being issued on the basis of the foregoing facts as presented. However, if upon investigation, it will 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.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue Footnotes 1. BIR Ruling No. ITAD-46-07 dated 11 April 2007 citing VAT Ruling No. 143-90 which revoked VAT Ruling No. 176-89.