ITAD BIR Ruling No. 233-12

June 5, 2012 ITAD BIR RULING NO. 233-12 Article 34, Vienna Convention on Diplomatic Relations; BIR Ruling No. ITAD 300-11 Embassy of Australia Level 23, Tower 2, RCBC Plaza 6819 Ayala Avenue, Makati City Attention: Mr. Travis Scott Bull First Secretary Gentlemen : This has reference to your Note Verbale No. 130/12 dated April 9, 2012, referred to this Office by the Department of Finance (DOF) and the Office of Protocol of the Department of Foreign Affairs (DFA),requesting exemption from ad valorem and value-added taxes (VAT) on the local purchase of one (1) unit 2012 Toyota Fortuner for the personal use of Mr. TRAVIS SCOTT BULL, First Secretary of the Embassy of Australia, specifically described, as follows: Make: TOYOTA FORTUNER 2.5li DSL A/T Model Year: 2012 Color: Black Engine Number: 2KD6961873 Frame Number: MHFZR69GX03035874 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; HESAIT xxx xxx xxx." Thus, the tax exemption privilege of an Embassy and its diplomatic agents does not include exemption from VAT and ad valorem tax, which are indirect taxes, 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 and ad valorem tax under Section 149 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 and ad valorem tax of the Embassy of Australia 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 Australia 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 2.5li DSL A/T for the personal motor vehicle of Mr. TRAVIS SCOTT BULL, First Secretary of the Embassy of Australia is exempt from VAT and ad valorem tax on the basis of reciprocity. (BIR Ruling No. ITAD-300-11 dated December 01, 2011) 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. TEaADS Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue