ITAD BIR Ruling No. 053-14

May 15, 2014 ITAD BIR RULING NO. 053-14 Principle of Reciprocity; BIR Ruling No. ITAD-34-99 Embassy of the United States of America 1201 Roxas Boulevard Manila, Philippines 1000 Gentlemen : This has reference to your Note No. 0184 dated February 18, 2014 referred to this Office by the Department of Finance (DOF) and the Department of Foreign Affairs (DFA), requesting for the exemption from the payment of value-added tax (VAT) on the local purchase of a motor vehicle for the official use of the Embassy of the United States of America, specifically described as follows: Type of Use: Official Make: Toyota Innova 2.5 G DSL A/T Model Year: 2014 Color: Thermalyte Frame Number: KUN405104500 Engine Number: 2KDU470534 In reply, please be informed that Article 34 of the Vienna Convention on Diplomatic Relations reads: "ARTICLE 34 A diplomatic agent shall be exempt from all dues and taxes, personal or real, national, regional or municipal, except: (a) indirect taxes of a kind which are normally incorporated in the price of the goods and services; xxx xxx xxx" Thus, the tax exemption privilege of an Embassy and its diplomatic agents does not include exemption from VAT on its local purchases of goods and services. In other words, purchases by that Embassy of goods and/or services shall, in general, be subject to the VAT prescribed under Sections 106 and 108 of the National Internal Revenue Code of 1997, as amended. IDETCA However, applying the principle of reciprocity, this Office may confirm exemption of the Embassy of the United States of America and/or its personnel on their local purchase of motor vehicles it appearing from the list submitted by the DFA dated July 23, 2013 that the Government of the United States of America allows similar exemption to the Philippine Embassy and/or its personnel on their purchase of motor vehicles in the United States. In view thereof, the local sale of one (1) unit of 2014 Toyota Innova 2.5 G DSL A/T for the official use of the Embassy of the United States of America, being an entity exempt from VAT, shall be subject to VAT at zero-percent (0%) rate pursuant to Section 106 (A) (2) (c) of the NIRC of 1997 as amended. (BIR Ruling No. ITAD-34-99 dated October 18, 1999) 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