Embassy of the Federal Republic of Brazil

September 5, 2019 ITAD BIR RULING NO. 026-19 Principle of Reciprocity Embassy of the Federal Republic of Brazil 16F Liberty Center 104 HV Dela Costa Street, Salcedo Village Makati City Gentlemen : This has reference to your Note No. 055/19 dated July 15, 2019 referred to this Office by the Department of Finance and the Department of Foreign Affairs (DFA), requesting for the exemption from the payment of value-added (VAT) and ad valorem taxes on the local purchase of a motor vehicle for the official use of the Embassy of the Federal Republic of Brazil, specifically described as follows: cTDaEH Type of Use: Official Make: Ford Everest 2.2L Ambiente 4x2 AT Model Year 2018 Color: Aluminum Metallic Frame Number: MNCAXXMAWAHD63556 Engine Number: P4AT2550221 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 and ad valorem tax, which are indirect taxes, on their local purchase of goods and services. In other words, purchases by that Embassy or its agents of goods and/or services shall, in general, be subject to the VAT and ad valorem tax under Sections 106 and 149 of the National Internal Revenue Code of 1997, as amended, respectively. However, applying the principle of reciprocity, this Office may confirm VAT and ad valorem tax exemption to the Embassy of the Federal Republic of Brazil and/or its personnel on their local purchase of motor vehicles since it appears from the list submitted by the DFA dated July 18, 2019, that the Government of the Federal Republic of Brazil allows similar exemption to the Philippine Embassy and/or its personnel on their purchase of motor vehicles in Brazil. In view thereof, the local sale of one (1) unit of 2018 Ford Everest 2.2L Ambiente 4x2 AT for the official use of the Embassy of the Federal Republic of Brazil, an exempt entity, shall be subject to VAT at zero-percent (0%) rate pursuant to Section 106 (A) (2) (b) of the NIRC of 1997, as amended. Such sale is likewise 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 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.) CAESAR R. DULAY Commissioner of Internal Revenue