ITAD BIR Ruling No. 243-12

June 6, 2012 ITAD BIR RULING NO. 243-12 Section 19, Article VI (Officials) Convention on the Privileges and Immunities of the Specialized Agencies of the United Nations United Nations Children's Fund 31st Floor, Yuchengco Tower RCBC Plaza 6819 Ayala Avenue Makati City Attention: Anselme C. Motch Chief of Operations Gentlemen : This refers to your request for tax exemption dated April 12, 2012 concerning the purchase of motor vehicle by and for the personal use of Trevor Daniel Clark [Chief of Field Office, United Nations Children's Fund ("UNICEF") Mindanao Office],as described hereunder: Make: Toyota Fortuner 4x2 Diesel Automatic Transmission Model Year: 2012 Color: Extreme Black Engine No.: 2KD-6977959 Chassis No.: MHFZR-69G-003036953 Relative thereto, please be informed that Section 19, Article VI of the Convention on the Privileges and Immunities of the Specialized Agencies of the United Nations 1 provides: cCAIaD "Article VI OFFICIALS xxx xxx xxx Section 19. Officials of the specialized agencies shall: a) Be immune from legal process in respect of words spoken or written and all acts performed by them in their official capacity; b) Enjoy the same exemptions from taxation in respect of the salaries and emoluments paid to them by the specialized agencies and on the same conditions as are enjoyed by officials of the United Nations; c) Be immune, together with their spouses and relatives dependent on them, from immigration restrictions and alien registration; d) Be accorded the same privileges in respect of exchange facilities as are accorded to officials of comparable rank of diplomatic missions; e) Be given, together with their spouses and relatives dependent on them, the same repatriation facilities in time of international crises as officials of comparable rank of diplomatic missions; f) Have the right to import free of duty their furniture and effects at the time of first taking up their post in the country in question." With respect to exemption from taxes ,it is clear under Section 19 of the Convention that officials of the specialized agencies of the United Nations including UNICEF are exempt only from (a) direct taxes on income in respect of their salaries and emoluments, and (b) taxes and customs duties on imported furniture and personal effects. ADCEaH This being the case, this Office hereby rules that the purchase of the subject Toyota Fortuner by and for the personal use of Mr. Clark of UNICEF shall be subject to tax in the Philippines, particularly, value-added tax and excise tax ,the burden of payment of which may be subsequently passed-on or shifted to the person to which the motor vehicle is sold, pursuant to Sections 106 (A),105 and 149 of the National Internal Revenue Code of 1997, as amended, and Section 3 of Revenue Regulations No. 25-2003 ,2 to wit: "SEC. 106. Value-added Tax on Sale of Goods or 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 transferors: Provided, That the President, upon the recommendation of the Secretary of Finance, shall, effective January 1, 2006, 3 raise the rate of value-added tax to twelve percent (12%),..." "SEC. 105. Persons Liable. Any person who, in the course of trade or business, sells, barters, exchanges, leases goods or properties, renders services, and any person who imports goods shall be subject to the value-added tax (VAT) imposed in Sections 106 to 108 of this Code. The value-added tax is an indirect tax and the amount of tax may be shifted or passed on to the buyer, transferee or lessee of the goods, properties or services. This rule shall likewise apply to existing contracts of sale or lease of goods, properties or services at the time of the effectivity of Republic Act No. 7716." "SEC. 149. Automobiles . There shall be levied, assessed and collected an ad valorem tax on automobiles based on the manufacturer's or importer's selling price, net of excise and value-added tax, in accordance with the following schedule ..." "SEC. 3. Persons Liable. The following persons shall be liable for the payment of ad valorem tax on automobiles: a. On locally manufactured/assembled automobiles The excise tax shall be paid by the manufacturer/assembler of automobiles. Should domestically manufactured/assembled automobiles be removed from the place of manufacture/assembly without the payment of the tax, the dealer/trader, owner, or person having possession thereof shall be liable for the excise tax due thereon. In case of transfer of locally manufactured/assembled automobiles from a tax-exempt person to a non-tax exempt individual or entity, the transferee or possessor thereof shall be the one liable for the excise tax." (Emphasis ours) Please be guided accordingly. IDESTH Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue Footnotes 1. Approved by the General Assembly of the United Nations on November 21, 1947. 2. Amended Revenue Regulations Governing the Imposition of Excise Tax on Automobiles pursuant to the Provisions of Republic Act No. 9224, An Act Rationalizing the Excise Tax on Automobiles, Amending for the Purpose the National Internal Revenue Code of 1997, and for Other Purposes. 3. The VAT rate is increased to 12 percent on February 1, 2006 , in accordance with the Memorandum of the Executive Secretary to the Secretary of Finance dated January 31, 2006, as circularized by Revenue Memorandum Circular No. 7-2006 (Publishing the Full Text of the Memorandum from Executive Secretary Eduardo R. Ermita dated January 31, 2006 Approving the Recommendation of the Secretary of Finance to Increase the Value Added Tax Rate from Ten Percent to Twelve Percent) dated January 31, 2006.