ITAD BIR Ruling No. 198-12

May 21, 2012 ITAD BIR RULING NO. 198-12 Article 34, Vienna Convention on Diplomatic Relations; BIR Ruling No. ITAD 067-06 Embassy of Spain 27th Floor, Equitable Bank Tower 8751 Paseo de Roxas, Makati City Attention: His Excellency Jorge Domecq Ambassador Gentlemen : This has reference to your Note Verbale No. 42/2012 dated April 20, 2012, referred to this Office by the Department of Finance and the Office of Protocol of the Department of Foreign Affairs, requesting exemption from value-added tax (VAT) on the local purchase of one (1) unit 2012 Toyota Fortuner for the official use of the Embassy of Spain, specifically described, as follows: Make: TOYOTA FORTUNER G 2.7L 4x2 Gas A/T Model Year: 2012 Color: Extreme Black Engine Number: 2TR7299179 Frame Number: MHFZX69G107036684 In reply, please be informed that Article 34 of the Vienna Convention on Diplomatic Relations reads: HSaIDc "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 VAT, which is an indirect tax, on their 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 under Sections 106 and 108 of the National Internal Revenue Code of 1997 (NIRC of 1997) as amended. However, applying the principle of reciprocity, this Office may confirm the exemption from VAT of the Embassy of Spain and/or its personnel on their local purchase of motor vehicles, it appearing from the list submitted by the DFA dated February 2, 2012 that the Government of Spain allows similar exemption to the Philippine Embassy and/or its personnel on their local purchases of motor vehicles thereat. Hence, the local purchase of one (1) unit 2012 Toyota Fortuner G 2.7L 4x2 GAS A/T for the official use of the Embassy of Spain is exempt from VAT on the basis of reciprocity. (BIR Ruling No. ITAD 067-06 dated June 8, 2006) 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. aCATSI Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue