ITAD BIR Ruling No. 095-13

April 5, 2013 ITAD BIR RULING NO. 095-13 Principle of Reciprocity Royal Embassy of Cambodia Unit 7A-B Country Space 1 Building Sen. Gil Puyat Avenue Makati City Gentlemen : This refers to the request for value-added tax (VAT) exemption on the local purchase of goods and services by the Royal Embassy of Cambodia in Manila. 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 19 May 2013 letter of the Office of Protocol of the Department of Foreign Affairs (DFA), the Philippine Embassy in Phnom Penh is being accorded VAT and other tax exemption privileges on a reimbursement basis by the Cambodian Government on its purchase of goods and services (inclusive of utilities) therein. The Philippine Embassy and its diplomatic officials are likewise accorded tax exemption on importation of motor vehicles in Cambodia. Accordingly, the DFA recommends favourable action on VAT-related requests of the Royal Embassy of Cambodia in the Philippines on the basis of reciprocity. STcaDI Based thereon, the Royal Embassy of Cambodia in Manila may now proceed to secure the necessary VAT exemption on the purchase of specific goods and services (inclusive of utilities) , and on importation of motor vehicles in the Philippines, on the basis of reciprocity. Please be guided accordingly. Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue