Embassy of the Kingdom of the Netherlands

October 18, 2019 ITAD BIR RULING NO. 038-19 Principle of Reciprocity; Revenue Memorandum Order No. 10-2019 Embassy of the Kingdom of the Netherlands 26th Floor, Equitable Bank Tower 8751 Paseo de Roxas 1227 Makati City Gentlemen : This refers to your Note No. MAN/AZ/061 dated 27 May 2019, indorsed by the Department of Foreign Affairs, Office of Protocol (DFA-OP) requesting for a BIR ruling to confirm Value-Added Tax (VAT) exemption on the local purchase of goods and services of the Embassy of the Kingdom of Netherlands, its diplomatic and non-diplomatic personnel. IDTSEH In reply please be informed that while the Vienna Convention on Diplomatic Relations of 1961 exempts diplomatic missions ( i.e. , embassies and consulates) and their diplomatic agents from all dues and taxes, personal or real, national, regional or municipal, they are nevertheless subject to the indirect taxes of a kind which are normally incorporated in the price of goods or services ( e.g. , VAT). Nevertheless, under the principle of reciprocity, this Office may grant tax privileges to a foreign embassy and to its members on their local purchases of goods and services, provided that they can submit to the Commissioner of Internal Revenue proof that the foreign government of the concerned embassy allows similar tax privileges to the Philippine Embassy or its personnel on purchases of goods or services in their country. As per the Indorsement of the DFA-OP dated 31 May 2019, and the DFA Matrix of VAT Privileges Enjoyed by the Philippine Foreign Service Posts dated 05 April 2019, the Philippine Embassy, its diplomatic and non-diplomatic personnel in The Hague, Netherlands enjoy VAT exemption privileges through reimbursement/refund , subject to the following limitations: 1. Minimum amount of purchase per invoice: a. excluding VAT 225.00 1 b. including VAT 270.00 2 2. Embassy Exempt from VAT only on purchase for 'OFFICIAL USE' of goods and services, including hotel services during official receptions. Advance exemption is allowed only if the amount is at least 35,000.00. 3. Diplomatic and Non-diplomatic personnel Exempt from VAT on goods and services including water services, internet, mobile phone services 4. Purchase of the items/services below are NOT EXEMPT , hence VAT paid cannot be reimbursed: a. Goods supplied by hotels, restaurant, cafes; b. Goods used for business purposes or which are sold, given away, hired out or in any other way put at the disposal of third parties of the personnel concerned; c. Hotel or food services; d. Catering organizations and related bodies; and e. Immovable property and services. 5. Dependents of diplomatic and non-diplomatic personnel may enjoy tax exemption by including their requests in the principal's request for reimbursement. Based on the foregoing, this Office is of the opinion as it hereby rules that, applying the principle of reciprocity, the Embassy of The Netherlands, its diplomatic and non-diplomatic personnel in the Philippines are entitled to the same VAT exemption privileges through reimbursement/refund , and not through point-of-sale basis. However, official receptions of the embassy which will amount to at least 35,000.00 shall be allowed VAT exemption at point of purchase. Accordingly, the Embassy of The Netherlands, its diplomatic and non-diplomatic personnel may proceed to secure the necessary VAT reimbursement/refund on their purchases of local goods and services in the Philippines subject only to the aforementioned limitations, and following the guidelines set forth in Revenue Memorandum Order No. 10-2019. Very truly yours, (SGD.) CAESAR R. DULAY Commissioner of Internal Revenue Footnotes 1. Based on prevailing BSP exchange rate. 2. Ibid.