ITAD BIR Ruling No. 188-12

May 4, 2012 ITAD BIR RULING NO. 188-12 Article 34, Vienna Convention on Diplomatic Relations Royal Thai Embassy 107 Thailand (Rada) Street, Legaspi Village Makati City, Metro Manila Gentlemen : This has reference to your Note Verbale No. 4000I/248 dated March 27, 2012, referred to this Office by the Department of Finance and the Office of Protocol of the Department of Foreign Affairs, requesting value-added tax (VAT) exemption for the purchase of a motor vehicle for the personal use of H.E. Prasas Prasasvinitchai, Ambassador Extraordinary and Plenipoteniary of the Royal Thai Embassy, specifically described as follows: Make: TOYOTA FORTUNER 2.5 Diesel 4x2 A/T Model Year: 2012 Color: Lithium Engine Number: 2KD6938486 Frame Number: MHFZR69G103037285 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 goods or services; xxx xxx xxx." Thus, the tax exemption privilege of an Embassy and its diplomatic agents does not include exemption from the VAT, which is an indirect tax, 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, both of the National Internal Revenue Code (NIRC) of 1997, as amended. EHSTcC However, under the principle of reciprocity, this Office may grant VAT exemption to the Royal Thai Embassy on their local purchase of motor vehicles it appearing from the list submitted by the DFA that the Government of Thailand allows similar exemption to the Philippine Embassy and/or its personnel on their local purchase of motor vehicles thereat. Hence, the local purchase of one (1) unit of 2012 Toyota Fortuner 2.5 Diesel 4x2 A/T for the personal use of His Excellency Prasas Prasasvinitchai, Ambassador Extraordinary and Plenipotentiary of Royal Thai Embassy is exempt from VAT on the basis of reciprocity. (BIR Ruling No. ITAD-34-99 dated October 18, 1999) 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. Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue