ITAD BIR Ruling No. 050-12

February 14, 2012 ITAD BIR RULING NO. 050-12 Article 34, Vienna Convention on Diplomatic Relations Embassy of the Islamic Republic of Pakistan 6th Floor Alexander House 132 Amorsolo Street Legaspi Village, Makati City Gentlemen : This refers to the request for value-added tax (VAT) exemption on the local purchase of goods and services by the Embassy of the Islamic Republic of Pakistan in Manila and its qualified embassy personnel. In this regard, please be informed that while Article 34 of the Vienna Convention on Diplomatic Relations of 1961 exempts 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 exemption to the embassy of a foreign state and to the members of diplomatic missions on their local purchases of goods and services, provided that they can submit to the Commissioner of Internal Revenue proof that the said foreign government allows similar tax exemptions to the Philippine Embassy or its personnel on their purchases of goods or services in that foreign country. As per the updated list of the Office of Protocol of the Department of Foreign Affairs indorsed to this Bureau on November 23, 2011, the Philippine Embassy and its diplomatic personnel in Islamabad, Pakistan are accorded refund on VAT paid on the local purchase of goods and services. Moreover, the VAT exemption on local purchase of motor vehicles extends to non-diplomatic personnel of the Philippine Embassy in Islamabad. Accordingly, the Embassy of the Islamic Republic of Pakistan is now included in the list of diplomatic missions and other entities entitled to VAT exemption in the Philippines on the basis of reciprocity. CHaDIT This Office, therefore, is of the opinion as it hereby rules that the Embassy of the Islamic Republic of Pakistan and its diplomatic personnel in Manila are exempt from VAT on the purchase of goods and services including the local purchase of motor vehicles in the Philippines, on the basis of reciprocity. Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue