Mr. Jerril G. Santos

June 13, 2018 ITAD BIR RULING NO. 073-18 Article 23, Vienna Convention Mr. Jerril G. Santos Assistant Secretary Office of Protocol Department of Foreign Affairs 2330 Roxas Blvd., Pasay City 1300 Dear Assistant Secretary Santos, This refers to the letter from the Department of Foreign Affairs, Office of Protocol (DFA-OP) dated 17 April 2018, requesting confirmation that the Embassy of the Federal Republic of Germany (German Embassy) shall be exempt from Capital Gains Tax (CGT), Documentary Stamp Tax (DST), Transfer Tax and Notarial Fees, should the latter intend to purchase real property in the Philippines. It is represented that, the DFA-OP has already secured from this Bureau a confirmation that the German Embassy is exempt from all national taxes including value-added tax (VAT) in respect of the premises of the mission per BIR Ruling No. ITAD-126-16; that said request was due to a purchase of immovable property made by the Philippine (PH) Embassy in Berlin, for which exemption from real estate transfer tax was sought; that the DFA-OP wishes to inform this Bureau of an agreement on reciprocity made between the Philippines and Germany relative to the waiver of real estate transfer tax; that according to the German Federal Foreign Office (FFO), the PH Embassy may be exempted from payment of all other government fees and taxes in relation to its purchase of property in Germany; that, to establish reciprocity, FFO has proposed that the DFA should certify Germany's exemption from payment of fees and taxes relevant to the purchase of property in the Philippines; and that, in view thereof, DFA-OP further seeks confirmation of exemption of the German Embassy, now to include CGT, DST, transfer tax and notarial fees. HTcADC In reply, please be informed that the Philippines is a signatory to the Vienna Convention on Diplomatic Relations (Vienna Convention). Its Article 23 provides: "Article 23 1. The sending State and the head of the mission shall be exempt from all national, regional or municipal dues and taxes in respect of the premises of the mission , whether owned or leased, other than such as represent payment for specific services rendered . 2. The exemption from taxation referred to in this article shall not apply to such dues and taxes payable under the law of the receiving State by persons contracting with the sending State or the head of the mission." (Underscoring ours) Based on the above provisions, exemption from all national taxes is accorded the sending State in respect of the premises of the mission, whether owned or leased. Generally, purchase of property in the Philippines is subject to CGT and DST. The CGT is usually for the account of the seller. The payment of DST is usually sorted out between the seller and the buyer. However, if the buyer of the property will be the sending State thru its diplomatic mission in the Philippines, and the property is to be used as official premises of the latter, the buyer diplomatic mission will be exempt from and cannot be made to shoulder the DST, 1 pursuant to Article 23 of the Vienna Convention. However, the exemption from other fees on purchase of property like transfer tax 2 and registration fee, 3 is a matter which cannot be decided upon by this Office, since the jurisdiction over the imposition of these payments is with different government offices. Transfer tax is within the jurisdiction of the City or Municipal Treasurer; registration fee, on the other hand, is within the jurisdiction of the local Registry of Deeds or Land Registration Authority. It is therefore suggested that the request for exemption on transfer tax and registration fee be addressed to the said government authorities. Finally, in regard to notarial fees, kindly note that a notarial fee is payment for the service of a notary public, which is income on the part of the latter, and is sanctioned under the Rules on Notarial Practice of 2004. It is the opinion of this Office that this fee, being payment for specific service rendered, is not covered by the exemption under Article 23 of the Vienna Convention. To forego with the charges for the notarization of a document would be at the sole discretion of the notary public, and not for this Office to rule upon. It is hoped that the foregoing satisfies your concern. Very truly yours, (SGD.) CAESAR R. DULAY Commissioner of Internal Revenue Footnotes 1. Sec. 173 of the NIRC of 1997, as amended (Stamp Taxes Upon Documents, Loan Agreements, Instruments and Papers) provides that "x x x whenever one party to the taxable document enjoys exemption from the tax herein imposed, the other party thereto who is not exempt shall be the one directly liable for the tax." 2. Transfer Tax is imposed on any mode of transferring ownership of a real property, which varies from a low of 0.5% to a high of 0.75% of the zonal value or selling price whichever is higher and depending on the municipality where the property is located. This is computed and paid at the City or Municipal Treasurer. 3. Registration Fee is paid for the registration of the Deed of Absolute Sale. It is paid to the local Registry of Deeds or Land Registration Authority where the property is located.