ITAD BIR Ruling No. 133-16

November 24, 2016 ITAD BIR RULING NO. 133-16 Section 109 (K), NIRC of 1997, as amended; Article V (D), PH-PEMSEA Agreement Partnerships in Environmental Management for the Seas of East Asia (PEMSEA) PEMSEA Resource Facility Department of Environment and Natural Resources Compound Visayas Avenue, Quezon City 1100 Attention: AAA _______________ Gentlemen : This refers to Note No. PRF-2016-07 dated 24 August 2016 requesting value-added tax (VAT) and ad valorem tax exemption on the local purchase of one (1) unit motor vehicle by PEMSEA, for its official use, specifically described as follows: Make Model Color Chassis No. Engine No. Mitsubishi Montero Sport GLS Premium 2.4D 4x2 A/T 2016 Virgil Gray MMBGUKR10GH002473 4N15UAJ4208 In reply, please be informed that Section 109 (K) of the National Internal Revenue Code of 1997 (NIRC of 1997), as amended provides: " Section 109. Exempt Transactions. 1) Subject to the provisions of Subsection (2) hereof, the following transactions shall be exempt from value-added tax. xxx xxx xxx (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; xxx " In connection thereto, Article V (D), Section 1 of the Agreement between the Government of the Republic of the Philippines and the Partnerships in Environmental Management for the Seas of East Asia (PEMSEA) Establishing the PEMSEA Resource Facility Center (PH-PEMSEA Agreement) , concurred in by the Senate on 25 May 2015 as evidenced by Senate Resolution No. 86, 1 provides, to wit: aDSIHc " Article V IMMUNITIES AND PRIVILEGES OF PEMSEA xxx xxx xxx D. Taxation Section 1. The provisions of existing laws or ordinances to contrary notwithstanding, PEMSEA shall be exempt from the payment of all direct taxes and from value-added taxes on its purchase of goods, materials, equipment, vehicles and services for its official use. (Underscoring supplied) xxx xxx xxx" The above provision clearly and categorically provides that PEMSEA's purchase of vehicle for its official use shall be exempt from all direct taxes , and from VAT (an indirect tax). There is, however, no mention of exemption from ad valorem tax (excise, which is also an indirect tax). 2 In view thereof, PEMSEA's herein purchase of one (1) Mitsubishi Montero Sport GLS Premium 2.4D 4x2 A/T, is exempt from VAT. However, the said purchase is subject to ad valorem tax, pursuant to Article V (D), Section 1 of the PH-PEMSEA Agreement, in relation to 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 Footnotes 1. Resolution Concurring in the Ratification of the Agreement between the Government of the Republic of the Philippines and the Partnerships in Environmental Management for the Seas of East Asia (PEMSEA) Establishing the PEMSEA Resource Facility Center. 2. Diageo Philippines, Inc. vs. CIR [G.R. No. 183553, 12 November 2012] "Excise taxes partake of the nature of indirect taxes."