ITAD BIR Ruling No. 246-15

September 8, 2015 ITAD BIR RULING NO. 246-15 Principle of Reciprocity Embassy of the Lao People's Democratic Republic 34 Lapu-Lapu Street, Magallanes Village Makati City Gentlemen : This has reference to your Note No. 041/ALM.15 dated July 15, 2015 referred to this Office by the Department of Finance (DOF) and the Department of Foreign Affairs (DFA), requesting for the exemption from the payment of value-added taxes (VAT) on the local purchase of a motor vehicle for the official use of the Embassy of the Lao People's Democratic Republic, specifically described as follows: Type of Use: Official Make: Toyota Camry 2.5 V A/T Model Year: 2015 Color: Attitude Black Frame Number: MR053AK5004009177 Engine Number: 2AR-0215204 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 the goods and services; xxx xxx xxx" Thus, the tax exemption privilege of an Embassy and its diplomatic agents does not include exemption from VAT on its 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 prescribed under Sections 106 and 108 of the National Internal Revenue Code of 1997, as amended. However, applying the principle of reciprocity, this Office may confirm exemption of the Embassy of the Lao People's Democratic Republic and/or its personnel on their local purchase of motor vehicles it appearing from the list submitted by the DFA dated June 3, 2015 that the Government of the Republic of Laos allows similar exemption to the Philippine Embassy and/or its personnel on their purchase of motor vehicles in Laos. AcICHD In view thereof, the local sale of one (1) unit of 2015 Toyota Camry 2.5 V A/T for the official use of the Embassy of Laos, being an entity exempt from VAT, shall be subject to VAT at zero-percent (0%) rate pursuant to Section 106 (A) (2) (c) of the NIRC of 1997 as amended. 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. Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue