ITAD BIR Ruling No. 132-16

October 28, 2016 ITAD BIR RULING NO. 132-16 Section 106, NIRC of 1997, as amended; Article 2, PH-ICRC Agreement International Committee of the Red Cross 5/F Erechem Building, Rufino corner Salcedo Sts. Legaspi Village, Makati City 1229 Attention: AAA _______________ Gentlemen : This refers to your 14 January 2016 letter, indorsed by the Department of Foreign Affairs to this Bureau, requesting exemption from ad valorem and value-added taxes (VAT) on the local purchase of four (4) units of motor vehicle for the official use of the International Committee of the Red Cross (ICRC), specifically described as follows: Make Model Color Chassis No. Engine No. Toyota Innova 2.5J 2015 040 Freedom KUN40-5124569 2KDS532028 DSL M/T-AC White Toyota Innova 2.5J 2015 040 Freedom KUN40-5124557 2KDS531887 DSL M/T-AC White Toyota Hi-Ace 2015 058 White JTFJS02P405028600 2KDA813456 Commuter 2.5L DSL M/T-OJ Toyota HiLux 3.0L G 2015 040 Freedom MR0FZ29G802576081 1KD-U716147 4x4 DSL MT-51 White In reply, please be informed that Section 106 (A) (2) (c) of the National Internal Revenue Code of 1997 (NIRC of 1997), as amended provides: "Section 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, a 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, That the President, upon the recommendation of the Secretary of Finance, shall, effective January 1, 2006, raise the rate of value-added tax to twelve percent (12%). (2) The following sales by VAT-registered persons shall be subject to zero percent (0%) rate: xxx xxx xxx (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." In relation thereto, the ICRC executed a Headquarters Agreement with the Government of the Republic of the Philippines on 30 April 1985. Article 2 of the aforesaid Agreement provides for the exemption of the ICRC from all regional, municipal, provincial, and national taxes, to wit: "Article 2 Property and Funds 1. The ICRC Delegation shall be exempt from all regional, municipal, provincial or national dues and taxes . The ICRC Delegation shall not, however, claim exemption from fees, which are levied for public utility services. 2. The ICRC Delegation shall be exempt from taxes and customs duties and free from all restrictions and prohibitions in respect of the import and export of all items necessary for its activities, subject to the provisions of pertinent Philippine laws, rules and regulations. It is understood that the duty on such items will become payable in the event of the sale or disposal, within three years of importation, to a person not entitled to this exemption. xxx" (Underscoring ours) Based on Section 1 of Article 2 of the Headquarters Agreement, ICRC is clearly "exempt from all regional, municipal, provincial or national dues and taxes." Hence, the herein ICRC purchase of four (4) motor vehicles from Toyota is not subject to ad valorem tax and VAT, pursuant to the Headquarters Agreement between the Government of the Republic of the Philippines and ICRC and Section 109 (K) of the NIRC of 1997, 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. Very truly yours, (SGD.) CAESAR R. DULAY Commissioner of Internal Revenue