ITAD BIR Ruling No. 133-12

March 23, 2012 ITAD BIR RULING NO. 133-12 Article 34, Vienna Convention on Diplomatic Relations; BIR Ruling No. ITAD 34-99 Embassy of the United States of America 1201 Roxas Boulevard Ermita 1000 Manila Gentlemen : This has reference to your Note Verbale No. 0122 dated January 25, 2012, referred to this Office by the Department of Finance (DOF) and the Office of Protocol of the Department of Foreign Affairs (DFA), requesting exemption from ad valorem and value-added taxes (VAT) on the local purchase of one (1) unit 2012 Toyota Innova for the personal use of Mr. David Roy, Attach of the Embassy of the United States of America, specifically described, as follows: Make: TOYOTA INNOVA E M/T GAS Model Year: 2012 Color: Thermalyte Engine Number: 1TR-7159534 Frame Number: TGN40-5023971 Upon evaluation of documents submitted to this Office in support of said request, it was found that the subject vehicle is locally purchased from Toyota Motor Philippines Corporation. In reply, please be informed that Article 34 of the Vienna Convention on Diplomatic Relations reads: "ARTICLE 34 "A diplomatic agent shall be exempt from all dues and taxes, personal or real, national, regional or municipal, except: aCATSI "(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 VAT and ad valorem tax, which are indirect taxes, on their 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 VAT under Sections 106 and 108 and ad valorem tax under Section 149 of the National Internal Revenue Code of 1997 (NIRC of 1997) as amended. However, applying the principle of reciprocity, this Office may confirm the exemption from VAT and ad valorem tax of the Embassy of the United States of America and/or its personnel on their local purchase of motor vehicles, it appearing from the list submitted by the DFA dated February 2, 2012 that the Government of the United States of America allows similar exemption to the Philippine Embassy and/or its personnel on their local purchases of motor vehicles thereat. Hence, the local purchase of one (1) unit 2012 Toyota Innova E M/T GAS for the personal motor vehicle of Mr. David Vincent Roy, Attach of the Embassy of the United States of America is exempt from VAT and ad valorem tax on the basis of reciprocity. As for the sale made by a VAT-registered business establishment to the qualified foreign embassy, it shall enjoy the benefit of zero percent (0%) VAT pursuant to Revenue Memorandum Order No. 22-2004. 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. aDHCAE Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue