ITAD BIR Ruling No. 277-15

October 16, 2015 ITAD BIR RULING NO. 277-15 Section 106, NIRC of 1997, as amended; Article 2, PH-ICRC Agreement 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 7 July 2015 letter of Etienne Quetin, Logistics Coordinator, of the International Committee of the Red Cross (ICRC), 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 four (4) units of motor vehicle for the official use of the ICRC, specifically described, as follows: Make Model Color Chassis No. Engine No. Toyota Innova 2.5J 2015 040 Freedom KUN40-5124569 2KDS532028 DSL M/T-AC White Toyota Innova 2.5J 2015 040 Freedom KUN40-5124557 2KDS531887 DSL M/T-AC White Toyota Hi-Ace 2015 058 White JTFJS02P405028600 2KDA813456 Commuter 2.5L DSL M/T-QJ Toyota HiLux 2015 040 Freedom MR0FZ29G802576081 1KD-U716147 3.0L G White 4X4 DSL MT-51 In reply, please be informed that Section 106 (A) (2) (c) of the National Internal Revenue Code of 1997, as amended provides, viz. : "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%), . . . cSTHAC (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 2 of the Headquarters of Agreement between the Government of the Republic of the Philippines and the International Committee of the Red Cross (PH-ICRC Agreement) provides, viz. : " Article 2 PROPERTY AND FUNDS 1. The ICRC Delegation shall be exempt from all regional, municipal, provincial or national dues and taxes. The ICRC Delegation shall not, however, claim exemption from fees which are levied for public utility services. 2. The ICRC Delegation shall be exempt from taxes and customs duties and free from all restrictions and prohibitions in respect of the import and export of all items necessary for its activities, subject to the provisions of pertinent Philippine laws, rules and regulations. It is understood that the duty on such items will become payable in the event of the sale or disposal, within three years of importation, to a person not entitled to this exemption. xxx xxx xxx 5. The ICRC Delegation shall be exempted from all taxes and customs duties in respect of the importation of a motor vehicle for the official use of the Delegation. The importation of additional motor vehicles shall be subject to prior consultation and approval of the Government. All of the Delegation's motor vehicles may not be resold without the prior approval of the Government However, the motor vehicles may be re-exported subject to the existing laws and regulations of the Philippine Government." (Underscoring ours) AcSCaI Based on the foregoing, the grant of exemption on motor vehicle to ICRC is on importation of a motor vehicle for its official use. 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 four (4) units of Toyota Vehicles for the official use of the ICRC 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.