World Islamic Call Society

July 8, 2014 ITAD BIR RULING NO. 104-14 Sec. 106 (A) (2) (c), 1997 NIRC, as amended; Article II, paragraphs 1 & 2, PH-WICS Agreement Section 10, Convention on the Privileges and Immunities of the Specialized Agencies of the United Nations World Islamic Call Society Suite 1102 Liberty Center Building 104 H.V. Dela Costa Street, Salcedo Village, Makati City Attention: Rafiq Ahmed M. Aquiel Office Director Gentlemen : This refers to your Note No. 111/14 dated January 16, 2014 indorsed to this Office by the Department of Finance (DOF) and the Department of Foreign Affairs (DFA), requesting exemption from value-added tax (VAT) on the local purchase of motor vehicle for the official use of the World Islamic Call Society (WICS), specifically described as follows: Make Model Color Chassis No. Engine No. Toyota Fortuner 2014 Freedom MHFZX69G407061305 2TR-7703705 4x2 G GAS AT White In reply, please be informed of Section 109 (1) (K) of the amended 1997 National Internal Revenue Code (NIRC), provides as follows: "SEC. 109. Exempt Transactions. (1) Subject to the provisions of Subsection (2) hereof, the following transactions shall be exempt from the value-added tax: . . . (K) Transactions which are exempt under international agreements to which the Philippines is a signatory or under special laws, except those under Presidential Decree No. 529;" aEcDTC Moreover, pursuant to Section 106 (A) (2) (c) of the amended 1997 NIRC, sales of goods by VAT-registered sellers to persons or entities whose exemption under special laws or international agreements to which the Philippines is a signatory effectively subjects such sales to VAT at zero percent (0%) rate, thus: "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, value-added tax equivalent to ten percent (10%) 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: Provided, . . . (2) The following sales by VAT-registered persons shall be subject to zero percent (0%) rate: . . . (c) 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." Relative thereto, please be informed that Paragraphs 1 and 2, Article II of the Agreement between the World Islamic Call Society and the Government of the Republic of the Philippines 1 (PH-WICS Agreement) provides, as follows: "Article V Property, Funds, Assets xxx xxx xxx 1. Unless otherwise provided in this MOU, and in accordance with Philippine law, the society, including its property, funds and assets shall enjoy privileges in accordance with the Convention and Privileges and Immunities of Specialized Agencies of 21 November 1947, and Philippines laws and regulations pertinent to this matter. . . ." aITECA 2. Subject to the Philippine law. The Society shall be exempt from all taxes and customs duties on import and export of articles imported or exported for its official use. The articles imported under such exemption may not be sold within the country without the Government's prior approval and under conditions stipulated by it. The articles may, however, be exported subject to the existing laws and regulations of the Government. . . ." Accordingly, Section 10, Article III of the Convention on the Privileges and Immunities of the Specialized Agencies of the United Nations (UN Convention) , states that: "Article III Property, Funds and Assets xxx xxx xxx Section 10. While the specialized agencies will not, as a general rule, claim exemption from excise duties and from taxes on the sale of movable and immovable property which form part of the price to be paid, nevertheless when the specialized agencies are making important purchases for official use of property on which such duties and taxes have been charged or chargeable, States parties to this Convention will whenever possible, make appropriate administrative arrangements from the remission or return of the amount of duty or tax." The aforecited provision of the Agreement clearly requires that to be entitled to a possible remission or return of the amount of duty or tax, the subject purchase must be for official use of the WICS. But in lieu of remission or return of the amount of duty or tax related to the purchase for official use, a tax exemption privilege is instead granted. 2 In view thereof, this Office is of the opinion as it hereby rules that the sale of 2014 Toyota Fortuner 4x2 G GAS AT by the VAT-registered local car dealer for the official use of WICS, an exempt entity pursuant to the PH-WICS Agreement and Section 109 (K) of the amended 1997 NIRC, shall be subject to VAT at zero-percent (0%) rate pursuant to Section 106 (A) (2) (c) of the 1997 NIRC, as amended. 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. DcCITS Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue Footnotes 1. Signed on November 17, 2002. 2. BIR Ruling No. ITAD-46-07 dated 11 April 2007 citing VAT Ruling No. 143-90 which revoked VAT Ruling No. 176-89.