ITAD BIR Ruling No. 167-13

June 17, 2013 ITAD BIR RULING NO. 167-13 Principle of Reciprocity; BIR Ruling No. ITAD-021-12 Embassy of Malaysia 10th to 11th Floor, The World Center Building 330 Sen. Gil J. Puyat Avenue Barangay Bel-Air, Makati City 1209 Attention: Mme. Masliza Binti Mahamood First Secretary Gentlemen : This has reference to your Note No. BY 91/2013 dated April 17, 2013 referred to this Office by the Department of Finance (DOF) and the Department of Foreign Affairs (DFA), requesting for the exemption from the payment of value-added tax (VAT) on the local purchase of a motor vehicle for personal use of Mme. Masliza Binti Mahamood, First Secretary of the Embassy of Malaysia, specifically described as follows: ICTacD Type of Use: Personal Make: Toyota Fortuner 4x2 2.7G GAS A/T Model Year: 2013 Color: Lithium Frame Number: MHFZX69G507046747 Engine Number: 2TR7450019 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: (a) indirect taxes of a kind which are normally incorporated in the price of the goods and services; xxx xxx xxx" Thus, the tax exemption privilege of an Embassy and its diplomatic agents does not include exemption from VAT on its 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 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 exemption of the Embassy of Malaysia and/or its personnel on their local purchase of motor vehicles it appearing from the list submitted by the DFA dated October 8, 2012 that the Government of Malaysia allows similar exemption to the Philippine Embassy and/or its personnel on their purchase of motor vehicles in Malaysia. Hence, the local purchase of one (1) unit of 2013 Toyota Fortuner 4x2 2.7G GAS A/T for personal use of Mme. Masliza Binti Mahamood, First Secretary of the Embassy of Malaysia is exempt from VAT. (BIR Ruling No. ITAD-021-12 dated January 31, 2012) 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. ADEacC Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue