ITAD BIR Ruling No. 197-15

June 3, 2015 ITAD BIR RULING NO. 197-15 Principle of reciprocity Evelyn D. Austria-Garcia Assistant Secretary, Office of Protocol Department of Foreign Affairs 2330 Roxas Blvd., Pasay City, Manila, 1000 Gentlemen : This refers to your 04 November 2014 letter seeking guidelines from this Bureau for the business establishment's recognition of the tax exemption privileges of the dependent children of diplomats as derivatives of their parents. In reply, please be informed that VAT exemption privileges are accorded to qualified diplomats and their dependents in the Philippines based only on the principle of reciprocity. Consequently, this Bureau issues rulings, certificates or identification cards, in case of US Embassy diplomats, granting VAT exemption privileges to qualified embassy personnel based on updates/categorical confirmation by the Department of Foreign Affairs (DFA) of the VAT exemption privileges being accorded to the members of Philippine missions which vary from country to country. Hence, the VAT exemption privileges accorded to qualified embassy personnel in the Philippines may extend to dependent children below (18) eighteen years of age, IF and only IF, the same treatment is being accorded to our Filipino diplomats' children abroad. Accordingly, this Bureau cannot yet issue clear guidelines on the matter considering the varying privileges extended to diplomats by virtue of reciprocity and pending determination by the DFA on whether dependent children below 18 years old of Filipino diplomats are recognized as VAT exempt derivative of their parents' exemption privilege. Considering the DFA confirmation that in the United States (US), the US Government grants tax exemption to Filipino diplomats on purchase of goods of over Fifty Dollars ($50.00), and that their dependent children below 18 years old have diplomatic privileges as derivatives from their diplomat parents, thereby recommending that the same treatment be applied to the officials of the US Embassy here in the Philippines, then this Office is of the opinion and so holds that the VAT exemption privileges accorded to qualified personnel of the US Embassy may extend to their dependent minor children below 18 years old. The US diplomat parent claiming exemption for his/her minor child must show the valid DFA ID of the child. A list of dependent children below the age of 18 of the US Embassy personnel in the Philippines with copy of their valid and subsisting identification (ID) issued by the DFA shall be provided this Bureau for verification and monitoring purposes. Please be guided accordingly. Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue