ITAD BIR Ruling No. 048-21

November 17, 2021 ITAD BIR RULING NO. 048-21 Principle of Reciprocity _________________________ Department of Foreign Affairs 2330 Roxas Boulevard 1300 Pasay City Dear _______________ : This refers to the request of the Embassy of the Republic of Palau (Embassy) for the renewal of the Value-Added Tax (VAT) Certificate (VC) of ______________, Charg d' Affaires of the Embassy, which was indorsed by the Office of Protocol of the Department of Foreign Affairs (DFA-OP). Based on the information received from the DFA-OP, there is currently no resident Philippine mission in Palau. This notwithstanding, the DFA-OP still recommended that a VC be issued in favor of __________, which shall remain valid for one (1) year. In reply, please be informed that the grant of VAT exemption highly depends on the VAT privileges being accorded to our Philippine Foreign Service Posts (PFSPs) by the different tax jurisdictions abroad which is regularly monitored by the DFA-OP. The Matrix on VAT exemption Privileges Enjoyed by PH Foreign Service Posts and its Personnel (VAT Matrix) and the DFA-OP's endorsement on the tax privileges being enjoyed by all our PFSPs abroad serve as a guide in determining whether or not the applicant is entitled to VAT privileges. 1 Considering that there is no PFSP based in Palau, the principle of reciprocity cannot be used as basis for the grant of VAT exemption privileges to the Embassy and its diplomats here in the Philippines. It must be emphasized that for reciprocity to apply, the PFSP in Palau must actually be enjoying VAT privileges therein. In view of the foregoing, the request of the Embassy is hereby denied for lack of legal basis. Accordingly, VC No. 2021-297 previously issued in favor of the Embassy should be surrendered to the Bureau of Internal Revenue (BIR) for cancellation. This ruling effectively invalidates BIR Ruling No. ITAD-096-13 issued on April 5, 2013 which previously served as the basis for the grant of VAT exemption to the Embassy and its qualified personnel. Very truly yours, (SGD.) CAESAR R. DULAY Commissioner of Internal Revenue Footnotes 1. Paragraph III of Revenue Memorandum Order No. 10-2019.