ITAD BIR Ruling No. 054-10

October 18, 2010 ITAD BIR RULING NO. 054-10 NIRC of 1997, Section 106 (2) (c); Convention on the Privileges and Immunities of the Specialized Agencies of the United Nations, Article III, Sections 1 and 10; BIR Ruling No. DA-ITAD-038-10 International Labour Organization 9th Floor, Yuchengco Tower RCBC Plaza 6819 Ayala Avenue Makati City Gentlemen : This refers to your Note No. 2010-158 dated September 13, 2010, indorsed to this Office by the Department of Foreign Affairs, requesting re-confirmation of the grant of value-added tax (VAT) exemption pursuant to VAT Ruling No. 109-99. It is represented that ILO Manila is a specialized agency of the United Nations (UN); and that pursuant to the UN Charter and to the Convention on the Privileges and Immunities of the Specialized Agencies of the United Nations to which the Philippines is a signatory, ILO Manila is exempt from the payment of VAT. In reply, please be informed that Section 106 (A) (2) (c) of the National Internal Revenue Code (NIRC) of 1997, as amended provides as follows: "SEC. 106. The following sales by a VAT-registered persons shall be subject to zero percent (0%) rate xxx xxx xxx (2) Zero-rated Sales The following sales by VAT-registered persons shall be subject to zero percent rate: (C) Sales to persons or entities whose exemption under special laws or international agreements to which the Philippines is a signatory effectively subjects such sales to zero rate. ACTISD xxx xxx xxx" In relation thereto, Section 10, Article III of the Convention on the Privileges and Immunities of the Specialized Agencies of the United Nations dated November 21, 1947 provides: "Article III xxx xxx xxx Section 10 While the specialized agencies will not, as a general rule, claim exemption from excise duties and from taxes on the sale of movable and immovable property which form part of the price to be paid, nevertheless when the specialized agencies are making important purchases for official use of property on which such duties and taxes have been charged or chargeable, States parties to this Convention will, whenever possible, make appropriate administrative arrangements for the remission or return of the amount of duty or tax. xxx xxx xxx" Relative thereto, Section 1 (b), Article I of the same UN Convention provides: "Article I DEFINITION AND SCOPE Section 1 In this Convention: (i) . . . (ii) The words "specialized agencies" mean: xxx xxx xxx (a) International Labour Organization; xxx xxx xxx" In view of all of the foregoing, this Office is of the opinion and hereby holds that the herein purchases of goods and services by the ILO for its official use are subject to VAT at zero percent rate pursuant to Section 106 (A) (2) (c) of the NIRC of 1997, as amended. (BIR Ruling No. DA-ITAD-038-10, dated September 21, 2010) This ruling is issued on the basis of the facts as represented. However, if upon investigation it shall be disclosed that the facts are different, then this ruling shall be without force and effect as the herein parties are concerned. HDTCSI Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue