ITAD BIR Ruling No. 102-12

February 20, 2012 ITAD BIR RULING NO. 102-12 Article 34, Vienna Convention on Diplomatic Relations Delegation of the European Union in the Philippines 30th Floor, Tower 2, RCBC Plaza 6819 Ayala Avenue 1200, Makati City Attention: Mr. Johann Georg Farnhammer First Secretary Gentlemen : This has reference to your Note No. 11/157 dated September 12, 2011 referred to this Office by the Department of Finance and the Office of Protocol of the Department of Foreign Affairs (DFA),requesting for the exemption from payment of value-added tax (VAT) on the purchase of a second-hand, previously tax-exempted motor vehicle for the personal use of Mr. Johann Georg Farnhammer, First Secretary of the Delegation of the European Union from Mr. Nicholas Taylor, First Secretary of the same Delegation, specifically described as follows: Make: Toyota Corolla Model Year: 2003 Color: White Engine Number: 3ZZ-4256400 Frame Number: ZZE121-8010538 In reply, please be informed that pursuant to Article 34 of the Vienna Convention on Diplomatic Relations, pertinent portion of which reads: "Article 34 A diplomatic agent shall be exempt from all dues and taxes, personal or real, national, regional or municipal, except: (a) indirect taxes of a kind which are normally incorporated in the price of goods or services; xxx xxx xxx" Thus, the tax exemption privilege of an Embassy and its diplomatic agents does not include exemption from the VAT on its local purchases of goods and services. In other words, purchases by that Embassy of goods and/or services shall, in general, be subject to the value-added tax prescribed under Sections 106 and 108, both of the National Internal Revenue Code (NIRC) of 1997. aCcEHS However, applying the principle of reciprocity, this Office may grant exemption to Mr. Johann Georg Farnhammer, First Secretary of the Delegation of the European Union, a German National, and whose embassy in the Philippines is included in the updated list of diplomatic missions entitled to VAT exemption on the purchase of locally-assembled motor vehicles, on the basis of reciprocity, as confirmed by the Office of Protocol of the DFA in its letter dated November 23, 2011 that his Government allows similar exemption to Philippine Embassy personnel on their local purchases of motor vehicles in his country. Hence, since the transferor and the transferee of the subject motor vehicle are VAT exempt individuals, the sale of one (1) unit 2003 Toyota Corolla by Mr. Nicholas Taylor to Mr. Johann Georg Farnhammer, for the latter's personal use continues to be exempt from VAT. This ruling is issued on the basis of the facts as represented. However, if upon investigation it shall be disclosed 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.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue