ITAD BIR Ruling No. 096-13

April 5, 2013 ITAD BIR RULING NO. 096-13 Principle of Reciprocity Embassy of the Republic of Palau G/F Unit 101 Marbella Condominium II 2071 Roxas Blvd., Malate, Manila Gentlemen : This refers to the request for value-added tax (VAT) exemption on the local purchase of goods and services by the Embassy of the Republic of Palau in Manila and its qualified embassy personnel. 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 08 October 2012 letter of the Office of Protocol of the Department of Foreign Affairs on the updates from the various Philippine Foreign Service Posts, the Philippine Embassy in Koror, its diplomatic and non-diplomatic personnel, are not being imposed VAT on purchase of goods, services (inclusive of utilities) and motor vehicles thereat. Accordingly, the Embassy of the Republic of Palau is now included in the list of diplomatic missions and other entities entitled to VAT exemption in the Philippines on the basis of reciprocity. SacDIE Based thereon, the Embassy of the Republic of Palau, its diplomatic and non-diplomatic personnel in Manila may now proceed to secure the necessary VAT exemption on the purchase of specific goods and services (inclusive of utilities) , and motor vehicles locally purchased in the Philippines, on the basis of reciprocity. Please be guided accordingly. Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue