ITAD BIR Ruling No. 147-11

May 10, 2011 ITAD BIR RULING NO. 147-11 Sections 106 and 108, Tax Code of 1997, as amended; Article 34, Vienna Convention on Diplomatic Relations Embassy of the Republic of Palau Unit 101, Ground Floor, Marbella Condominium II 2071 Roxas Boulevard Malate, Manila Gentlemen : This refers to your Note Verbal No. 062/ERP-PHL/11 dated March 14, 2011, which was referred to this Office by the Office of Protocol of the Department of Foreign Affairs (DFA), requesting for the issuance of value-added tax (VAT) exemption certificates to the following officials of the Embassy: Name Rank/Status 1. H.E. Ramon Rechebei Ambassador Extraordinary and Plenipotentiary 2. Alfred Fritz Third Secretary 3. Anastacia Kuchad Medical Attach In reply, please be informed that Article 34 of the Vienna Convention on Diplomatic Relations provides: "ARTICLE 34 "A diplomatic agent shall be exempt from all dues and taxes, personal or real, national, regional or municipal, except: "(a) indirect taxes of a kind which are normally incorporated in the price of the goods and services; EcICDT xxx xxx xxx." (Emphasis supplied) Under Article 34, the tax exemption privilege of an embassy and its diplomatic agents in the Philippines does not include exemption from VAT, which is an indirect tax, on their local purchases of goods and services. In other words, such purchases of goods and services shall, in general, be subject to the VAT prescribed under Sections 106 and 108 of the National Internal Revenue Code of 1997, as amended. However, applying the principle of reciprocity, this Office may confirm entitlement of VAT exemption to the Embassy of the Republic of Palau and its personnel on their local purchase of goods and services based on a list submitted by the DFA that the Government of Palau allows similar exemption to the Philippine Embassy and its personnel in Palau on their purchase of goods and services therein. Accordingly, based on such list submitted by the DFA dated February 22, 2011, this Office confirms entitlement of VAT exemption to the Embassy of the Republic of Palau and its personnel on their purchase of basic goods and services in the Philippines. 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. HAECID Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue