ITAD BIR Ruling No. 244-12

June 6, 2012 ITAD BIR RULING NO. 244-12 Headquarters Agreement of the Asian Development Bank Memorandum of the Executive Secretary dated August 15, 1973 Asian Development Bank 6 ADB Avenue Mandaluyong City Attention: Alexander Tarnoff Unit Head Logistics Management Gentlemen : This refers to the indorsement dated April 18, 2012 of the Office of the Protocol, Department of Foreign Affairs, requesting for tax exemption of the sale of the following motor vehicle by Mr. Jason Paul Ryan (First Secretary, Australian Embassy) to Ms. Park Hyo Eun [Human Resource Specialist, Asian Development Bank ("ADB") ] under a Deed of Sale dated April 2, 2012 to wit: Make and Model: Honda CRV Model Year: 2006 Chassis No.: PADRD48706V401737 Engine No.: PNKD77-6401733 Color: Black Relative thereto, please be informed that Section 24 (f) of the Agreement between the Asian Development Bank and the Government of the Republic of the Philippines Regarding the Headquarters of the Asian Development Bank, 1 provides that officers, staff, experts and consultants of ADB are entitled to import, free of duty and other levies, one motor vehicle within twelve months after first taking up post in the Philippines, and to exercise the same privilege after a period of three years from the last importation, to wit: cCAIaD "Section 24. Officers and staff of the Bank, including for the purposes of this Article experts and consultants performing missions for the Bank, shall enjoy the following privileges and immunities: xxx xxx xxx (f) The right to import, free of duty and other levies, prohibitions and restrictions on imports, their furniture and effects including one automobile, within twelve (12) months after first taking up their post in the Republic of the Philippines, and the same right to import one automobile for replacement three (3) years after the last importation . . ." With respect to the right to import a second motor vehicle, this was modified by the Memorandum of the Executive Secretary to the Secretaries of Foreign Affairs and Finance on August 15, 1973 which allowed these ADB personnel to instead purchase the vehicle locally, to wit: "1. In connection with the request of the Asian Development Bank that each member of its professional staff be allowed to import two (2) tax-exempt automobiles, I wish to inform you that the request is hereby approved, provided that (i) the second car should be locally assembled drawn from those covered by the Progressive Car Manufacturing Company (PCMP), (ii) with a right of rebate of taxes as if said locally assembled cars were exported, (iii) that the exemption shall be extended only to staff members in the professional or higher level, and (iv) that the payment be made in a foreign currency acceptable as part of the international reserves of the Philippines. 2. The request by the Bank for its staff who are at higher or equivalent level to Administrative Assistant to import one (1) duty free automobile is likewise approved, subject to the four conditions cited above." Accordingly, since Ms. Park is a personnel of the ADB, the sale to her of the subject 2006 Honda CRV by Mr. Ryan (a diplomatic agent and the original privileged buyer) shall continue to be exempt from value-added tax and excise tax imposed under Sections 106 (A) and 149 of the National Internal Revenue Code of 1997, as amended, 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, 2 raise the rate of value-added tax to twelve percent (12%), . . ." "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 . . ." 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. IDESTH Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue Footnotes 1. Signed on December 22, 1966. 2. 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.