Asian Development Bank

March 26, 2018 ITAD BIR RULING NO. 049-18 Article IX, Section 34 of the Philippines-ADB Headquarters Agreement; Article 56 of the ADB Charter Asian Development Bank 6 ADB Avenue, Mandaluyong City 1550 Attention: AAA __________ Gentlemen : This refers to your letter dated 25 May 2017 requesting for a current ruling/confirmation from the Bureau of Internal Revenue regarding ADB's status as a tax-exempt institution, particularly that: (i) ADB and any transactions made by ADB are exempt from all taxation in the Philippines; (ii) ADB's tax exemption will apply to all its investment income in the Philippines; and TaCEHA (iii) No withholding of tax is to be applied on ADB's investment income in the Philippines. It is represented that ADB's purpose shall be to foster economic growth and cooperation in the Asia Pacific Region and to contribute to the acceleration of the process of economic development of the developing member countries in the region; that ADB requires the ability to invest in onshore peso-denominated securities issued by the Republic of the Philippines as an integral part of its local market operations and development mandate; that ADB has been in discussions with the Bureau of Treasury (BTr) regarding the Tax-Exempt Institution (TEI) window to ensure that ADB's income from such investment will not be subject to withholding taxes; that BTr advised ADB that the latter must submit to the former a certified copy of a current ruling/confirmation which is not more than a year, regarding ADB's status as a tax-exempt institution, before any actual over-the-counter purchase of government securities can be made through the TEI window. In reply, please be informed that Section 34 (a) of the 22 December 1966 Agreement Between the Asian Development Bank and the Government of the Republic of the Philippines Regarding the Headquarters of the Asian Development Bank (Philippines-ADB Headquarters Agreement) , provides: " ARTICLE IX Property of the Bank and Taxation Section 34 The Bank, its property and its operations and transactions shall be exempt from : (a) all taxation and any obligation for the payment, withholding or collection of any tax or duty. The Bank will not claim exemption from taxes or charges which are no more than payments for public utility services;" (Underscoring provided) Moreover, Article 56 of the Agreement Establishing the Asian Development Bank (ADB Charter) states that: "Article 56 EXEMPTION FROM TAXATION 1. The Bank, its assets, property, income and its operations and transactions, shall be exempt from all taxation and from all customs duties. The Bank shall also be exempt from any obligation for the payment, withholding or collection of any tax or duty ." (Underscoring provided) In view of the foregoing, ADB and transactions undertaken by it, are exempt from all taxation and are likewise exempt from any obligation for the payment or withholding of any tax. Hence, ADB's income from investment in government securities will not be subject to payment or withholding of tax pursuant to Article IX, Section 34 of the Philippines-ADB Headquarters Agreement and Article 56 of the ADB Charter . Accordingly, this Office holds that: (i) ADB and any transactions made by ADB are exempt from all taxation in the Philippines; (ii) ADB's tax exemption will apply to all its investment income in the Philippines; and (iii) No withholding of tax is to be applied on ADB's investment income in the Philippines. This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be ascertained that the facts are different, then this ruling shall be considered null and void. Very truly yours, (SGD.) CAESAR R. DULAY Commissioner of Internal Revenue