ITAD BIR Ruling No. 040-12

February 8, 2012 ITAD BIR RULING NO. 040-12 Article VII (Status, Immunities and Privileges), Articles of Agreement of the International Bank for Reconstruction and Development The World Bank/International Bank Reconstruction and Development (IBRD) 23rd Floor, Taipan Place Emerald Avenue, Ortigas Center Pasig City Attention: Mr. Mark Woodward Acting Country Director, Philippines East Asia and the Pacific Region Gentlemen : This refers to your letter dated October 19, 2011, as indorsed to us by the Department of Foreign Affairs and the Department of Finance, requesting confirmation that the purchase of the following motor vehicle by the World Bank is exempt from the applicable taxes, to wit: Make: Toyota Hi Ace Super Grandia Fabric 2-Tone Model Year: 2011 Color: 2JZ White Pearl 2T Chassis No.: JTFRS13P600022690 Engine No.: 2KD-5548017 In reply, please be informed that Section 109 (K) of the National Internal Revenue Code of 1997 (Tax Code), as amended, 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;" With respect to an international agreement, there is the Articles of Agreement of the World Bank. 1 Section 9 (a), Article VII thereof provides: ECDaAc "Article VII STATUS, IMMUNITIES AND PRIVILEGES xxx xxx xxx SEC. 9. Immunities from Taxation. (a) The Bank, its assets, property, income and its operations and transactions authorized by this Agreement, shall be immune from all taxation and from all customs duties. The Bank shall also be immune from liability for the collection or payment of any tax or duty. xxx xxx xxx" Under Section 9 (a) above, the World Bank, its assets, property, income and its operations and transactions, shall be exempt from all taxes and from all customs duties, and it shall be exempt from the obligation to collect or pay any tax or duty. Accordingly, inasmuch as the subject motor vehicle shall become the property of the World Bank, the purchase thereof by the Bank for its official use is exempt from VAT. Moreover, the motor vehicle is exempt from excise tax imposed under Section 109 of the Tax Code. cADEHI As for the sale made by a VAT-registered business establishment to World Bank, it shall enjoy the benefit of zero percent (0%) VAT pursuant to Section 106 (A) (2) (c) of the Tax Code. 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 Footnotes 1. The Philippines became a member of the World Bank on December 27, 1945.