ITAD BIR Ruling No. 116-11

April 11, 2011 ITAD BIR RULING NO. 116-11 Section 106 (A) (2) (c), National Internal Revenue Code of 1997, as amended; Sections 1 and 10, Convention on the Privileges and Immunities of the Specialized Agencies; BIR Ruling No. ITAD-002-11 United Nations Development Programme 30th Floor, Yuchengco Tower, RCBC Plaza 6819 Ayala Avenue corner Sen. Gil Puyat Avenue Makati City Gentlemen : This refers to your letter dated February 3, 2011, which was indorsed to this Office by the Department of Finance and the Office of Protocol and State Visits of the Department of Foreign Affairs, requesting for exemption from value-added tax ("VAT") of the local purchase of the following motor vehicle for the official use of the United Nations Development Programme ("UNDP"), to wit: SIcCEA Make: One Toyota Hi-Lux 4X4G DSL M/T Model Year: 2010 Color: 1CO Lithium Chassis No.: MROFZ29G401589125 Engine No.: 1KD-6525667 In reply, please be informed that Section 106 (A) (2) (c) of the National Internal Revenue Code ("Tax Code") of 1997, as amended, provides as follows: "SEC. 106. The following sales by VAT-registered persons shall be subject to zero percent (0%) rate: xxx xxx xxx (2) Zero-rated Sales The following sales by VAT-registered persons shall be subject to zero percent 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. xxx xxx xxx" In relation thereto, Section 10, Article III, and Section 1, Article 7, of the Convention on the Privileges and Immunities of the Specialized Agencies of the United Nations dated November 21, 1947 provide: "Article III 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 for the remission or return of the amount of duty or tax. xxx xxx xxx" "Article I DEFINITION AND SCOPE Section 1 In this Convention: (i) . . . (ii) The words "specialized agencies" mean: xxx xxx xxx (a) United Nations Development Programme; xxx xxx xxx" Based on the foregoing, important purchases made by specialized agencies of the UN in the Philippines are exempt from relevant duties and taxes. In the case of VAT, sales to these specialized agencies may be subject to VAT but at the rate of zero percent. This being the case, and since UNDP is a specialized agency of the UN, this Office is of the opinion and so holds that the aforementioned purchase of one unit of 2010 Toyota Hi-Lux 4X4G DSL M/T by UNDP is subject to VAT but at the rate of zero percent. (BIR Ruling No. ITAD-002-11, dated January 19, 2011) 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. HAEDIS Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue