ITAD BIR Ruling No. 026-12

January 31, 2012 ITAD BIR RULING NO. 026-12 Article 34, Vienna Convention on Diplomatic Relations Embassy of the Independent State of Papua New Guinea 3rd Floor, Corinthian Plaza Bldg. Paseo de Roxas, Legaspi Village Makati City Gentlemen : This has reference to your Note No. 33/2011 dated November 4, 2011 referred to this Office by the Department of Finance (DOF) and the Department of Foreign Affairs (DFA),requesting for exemption from payment of value-added tax (VAT) on the local purchase of a motor vehicle for the official use of the Embassy of the Independent State of Papua New Guinea, specifically described as follows: Type of Use : Official Make : 2011 Toyota HiAce Super Grandia 2.5 DSL AT Frame Number : JTFRS13P000022992 Engine Number : 2KD5575161 In reply, please be informed that Article 34 of the Vienna Convention on Diplomatic Relations reads: "ARTICLE 34 A diplomatic agent shall be exempt from all dues and taxes, personal or real, national, regional or municipal, except: (a) indirect taxes of a kind which are normally incorporated in the price of the goods and services; xxx xxx xxx." Thus, the tax exemption privilege of an Embassy and its diplomatic agents does not include exemption from VAT on its local purchases of goods and services. In other words, purchases by that Embassy of goods and/or services shall, in general, be subject to VAT as prescribed under Sections 106 and 108 both of the National Internal Revenue Code of 1997, as amended. AaEcDS However, applying the principle of reciprocity, this Office may confirm the VAT exemption of the Embassy of the Independent State of Papua New Guinea and/or its personnel on their local purchase of motor vehicles, it appearing from the list submitted by the DFA dated November 23, 2011 that the Government of the Independent State of Papua New Guinea allows similar exemption to the Philippine Embassy and/or its personnel on their local purchases of motor vehicles thereat. Hence, the local purchase of one (1) unit of 2011 Toyota HiAce Super Grandia 2.5 DSL AT for the official use of the Embassy of the Independent State of Papua New Guinea is exempt from VAT. As for the sale made by a VAT-registered business establishment to the qualified foreign embassy, it shall enjoy the benefit of zero percent (0%) VAT pursuant to Revenue Memorandum Order No. 22-2004. 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.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue