ITAD BIR Ruling No. 241-15

August 14, 2015 ITAD BIR RULING NO. 241-15 Section 106, NIRC of 1997, as amended Evelyn D. Austria-Garcia Assistant Secretary, Office of Protocol Department of Foreign Affairs 2330 Roxas Blvd, Pasay City, Manila, 1000 Dear Assistant Secretary Austria-Garcia : This refers to the 10 June 2015 letter of Rosarion N. Talaguit, Unit Manager, Office Management of the World Scout Bureau/Asia Pacific Regional Office (WOSM), indorsed by your Office and the Department of Finance, requesting exemption from payment of ad valorem and value-added taxes (VAT) on the local purchase of two (2) units of motor vehicle for the official use of the WOSM, specifically described, as follows: acEHCD Type of Use: Official Use Make & Model: 2015 Toyota Fortuner 2.5 DSL G 4x2 AT Frame No: MHFZR69G203129053 Engine No: 2KDS534474 Frame No: MHFZR69G503129113 Engine No: 2KDS534909 In reply, please be informed that Section 106 (A) (2) (c) of the National Internal Revenue Code of 1997, as amended provides, viz. : SDAaTC "Section 106. Value-added Tax on Sale of Goods or n Properties. (A) Rate and Base of Tax. There shall be levied, assessed and collected on every sale, barter or exchange of goods or properties, a value-added tax equivalent to ten percent (10%) of the gross selling price or gross value in money of the goods or properties sold, bartered or exchanged, such tax to be paid by the seller or transferor: Provided , That the President, upon the recommendation of the Secretary of Finance, shall, effective January 1, 2006, raise the rate of value-added tax to twelve-percent (12%), . . . (2) The following sales by VAT-registered persons shall be subject to zero percent (0%) rate: xxx xxx xxx (c) Sales to persons or entities whose exemption under special laws or international agreements to which the Philippines is a signatory effectively subjects such sales to zero rate." Relative thereto, Article III of the Memorandum of Agreement between the Government of the Republic of the Philippines and the World Organization of the Scout Movement provides, viz. : "Article III EXEMPTION FROM TAXES The SCOUT MOVEMENT shall be exempt from all taxes and customs duties on import and export of articles to include motor vehicles imported or exported for official purposes. The articles imported under such exemption may not be sold within the country without the GOVERNMENT's prior approval and under conditions stipulated by it. The article may be re-exported subject to existing laws, rules and regulations of the GOVERNMENT." (Underscoring ours) Based on the foregoing, WOSM shall be exempt from taxes on import of motor vehicle. There is no tax exemption provision above granting tax exemption on local purchase of motor vehicle, as in the instant transaction. In a long line of Supreme Court decisions, grant of tax exemptions must be based on a clear and unequivocal provision of law expressed in a language too plain to be mistaken. 1 In view thereof, and considering the absence of a clear legal basis for granting the requested exemption, this Office is of the opinion and so holds that the subject local purchase of two (2) units of Toyota Fortuner for the official use of the WOSM is subject to ad valorem and value-added taxes. Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue Footnotes 1. Davao Gulf Lumber Corp. v. Commissioner of Internal Revenue , 293 SCRA 76, 89 (1998). n Note from the Publisher: Written as "of" in the original document.