Department of Foreign Affairs

July 24, 2020 ITAD BIR RULING NO. 059-20 Secs. 32 (B) (6), 106 (A) (2) (b), 108 (B) (3), NIRC of 1997, as amended; Article VIII (D), Sections 1 & 4, PH-ACB Host Country Agreement Department of Foreign Affairs 2330 Roxas Boulevard 1300 Pasay City Attention: Porfirio M. Mayo, Jr. Acting Head of Office Gentlemen : This refers to your letter dated 21 February 2020 seeking confirmation that the assets, property, income, operations and transactions of the Asean Centre for Biodiversity (ACB) are exempt from taxes, pursuant to the Host Country Agreement between the Government of the Republic of the Philippines and Asean Centre for Biodiversity (PH-ACB Host Country Agreement). It is represented that ACB is the only ASEAN Centre that is being hosted by the Government of the Republic of the Philippines; that ACB was established in 2005 by virtue of an Agreement on the Establishment of the ASEAN Centre for Biodiversity which was signed by ten (10) ASEAN Senior Officials of the Environment of the ASEAN Member States; that in 2006, the PH-ACB Host Country Agreement was entered into between the Government of the Republic of the Philippines and the ASEAN; and that the PH-ACB Host Country Agreement was signed on 8 August 2006 and was concurred in by the Senate in 2009, per Senate Resolution No. 1311. In reply, please be informed of Section 32 (B) (6) of the National Internal Revenue Code of 1997 (NIRC), as amended, 1 which provides, viz. : " SEC. 32. Gross income . xxx xxx xxx (B) Exclusions from Gross Income. The following items shall not be included in gross income and shall be exempt from taxation under this Title: xxx xxx xxx (6) Income Exempt under Treaty. Income of any kind, to the extent required by any treaty obligation binding upon the Government of the Philippines." Based on the above provision, income exempt under a treaty which is binding upon the Government of the Philippines is excluded from gross income and is considered as exempt. Moreover, Section 106 (A) (2) (b) of the NIRC of 1997, as amended, provides, viz. : HESIcT " SEC. 106. Value-Added Tax on Sale of Goods or Properties . (A) Rate and Base of Tax. There shall be levied, assessed and collected on every sale, barter or exchange of goods or properties, a value-added tax equivalent to twelve percent (12%) of the gross selling price or gross value in money of the goods or properties sold, bartered or exchanged, such tax to be paid by the seller or transferor. xxx xxx xxx (2) The following sales by VAT-registered persons shall be subject to zero percent (0%) rate: xxx xxx xxx (b) 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." Furthermore, Section 108 (B) (3) of the NIRC of 1997, as amended, provides, viz. : SEC. 108. Value-Added Tax on Sale of Services and Use or Lease of Properties. (A) Rate and Base of Tax. There shall be levied, assessed and collected, a value-added tax equivalent to twelve percent (12%) of gross receipts derived from the sale or exchange of services, including the use or lease of properties. xxx xxx xxx (B) Transactions Subject to Zero Percent (0%) Rate. The following services performed in the Philippines by VAT-registered persons shall be subject to zero percent (0%) rate: xxx xxx xxx (3) Services rendered to persons or entities whose exemption under special laws or international agreements to which the Philippines is a signatory effectively subjects the supply of such services to zero percent (0%) rate." In relation thereto, Sections 1 & 4, Article VIII (D) of the PH-ACB Host Country Agreement provides that ACB is exempt from direct taxes and from VAT on its purchase of goods, materials, equipment, vehicles and services for its official use, viz. : " Article VIII IMMUNITIES AND PRIVILEGES D. Taxation and Customs xxx xxx xxx 1. The provisions of existing laws or ordinances to the contrary notwithstanding, ACB shall be exempt from the payment of all direct taxes and from value-added tax on its purchase of goods, materials, equipment, vehicles and services for its official use ." xxx xxx xxx 4. ACB shall be exempt from the payment of all customs duties and related levies of any kind, including value-added tax and excise tax on importation of goods, except charges for storage, transport and services supplied and shall be processed in the same manner and under existing procedures being applied by Department of Finance in similarly situated cases. x x x" (Underscoring supplied) In view of the foregoing, this Office is of the opinion and hereby confirms that ACB is exempt from direct taxes. Moreover, since the PH-ACB Host Country Agreement effectively subjects the supply of goods and services for the official use of ACB to zero percent (0%) VAT, the sale by a VAT-registered taxpayer to ACB shall, therefore, be subject to zero percent (0%) VAT. caITAC This ruling is issued on the basis of the facts as represented. However, if it shall be disclosed upon investigation 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.) CAESAR R. DULAY Commissioner of Internal Revenue Footnotes 1. As amended by Republic Act No. 10963 (Tax Reform for Acceleration and Inclusion, otherwise known as TRAIN Law).