ITAD BIR Ruling No. 261-13

September 2, 2013 ITAD BIR RULING NO. 261-13 Sections 106 (A) (2) (c) & 108 (B) (3), 1997 NIRC, as amended; Article 3, PH-IOM Cooperation Agreement International Organization for Migration Manila (Global) Administrative Centre 29th Floor, Citibank Tower, 8741 Paseo de Roxas 1226 Makati City Gentlemen : This refers to your Note Verbale dated 19 July 2013 requesting from the Bureau of Internal Revenue an updated ruling on value-added tax exemption on rentals for office spaces, purchases of office furniture and equipment and services/trainings pursuant to the Cooperation Agreement between the International Organization for Migration (IOM) and the Government of the Republic of the Philippines. AcHEaS In reply, please be informed that Sections 106 (A) (2) (c) and 108 (B) (3) of the 1997 National Internal Revenue Code, as amended (1997 NIRC, as amended) provide, viz. : "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 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%), after any of the following conditions has been satisfied: (i) Value-added tax collection as a percentage of Gross Domestic Product (GDP) of the previous year exceeds two and four-fifth percent (2 4/5%); or (ii) National government deficit as a percentage of GDP of the previous year exceeds one and one-half percent (1 1/2%). . . . xxx xxx xxx (2) Zero-rated Sales The following sales by VAT-registered persons shall be subject to zero percent (0%) rate: . . . (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. . . ." DICcTa "SEC. 108. Value-Added Tax on Sale of Services and Use or Lease of Properties . xxx xxx xxx (B) Transactions Subject to Zero Percent (0%) Rate. The following services performed in the Philippines by VAT-registered persons shall be subject to zero percent (0%) rate: . . . (3) Services rendered to persons or entities whose exemption under special laws or international agreements to which the Philippines is a signatory effectively subjects the supply of such services to zero percent (0%) rate; . . ." In relation thereto, Article 3 of the 13 March 2003 Cooperation Agreement between the Government of the Republic of the Philippines and the International Organization for Migration (PH-IOM Cooperation Agreement) provides, viz. : "Article 3 1. The Organization shall enjoy in the Republic of the Philippines the same privileges and immunities as those granted to specialized agencies of the United Nations by virtue of the Convention on the privileges and immunities of the specialized agencies of 21 November 1947. 2. In particular, the Organization shall be exempt from all indirect taxes for purchases of articles intended for official use. . . ." Based on the foregoing, IOM shall enjoy privileges as those granted to specialized agencies of the UN and shall be exempt from all indirect taxes for purchases of articles intended for official use. Hence, this Office is of the opinion and so holds that the office space rental payments , official purchases of office furniture and equipment and the conduct of official trainings in the Philippines by the IOM, being an entity exempt from VAT pursuant to the PH-IOM Cooperation Agreement and Section 109 (K) of the 1997 NIRC, as amended, shall be subject to VAT at zero-percent (0%) rate pursuant to Sections 106 (A) (2) (c) and 108 (B) (3) 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 facts are different, then this ruling is without force and effect insofar as the herein party is concerned. CDAEHS Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue