ITAD BIR Ruling No. 293-11

November 23, 2011 ITAD BIR RULING NO. 293-11 Article 34, Vienna Convention on Diplomatic Relations Embassy of Germany 25/F Tower 2, RCBC Plaza 6819 Ayala Ave. (cnr Sen. Gil Puyat Ave.) 1261 Makati City Gentlemen : This refers to the request for value-added tax (VAT) exemption on the local purchase of goods and services by the Embassy of Germany in Manila and its qualified embassy personnel. In this regard, please be informed that while Article 34 of the Vienna Convention on Diplomatic Relations of 1961 exempts diplomatic agents from all dues and taxes, personal or real, national, regional or municipal, they are nevertheless subject to the indirect taxes of a kind which are normally incorporated in the price of goods or services, e.g., VAT. Nevertheless, under the principle of reciprocity, this Office may grant tax exemption to the embassy of a foreign state and to the members of diplomatic missions on their local purchases of goods and services, provided that they can submit to the Commissioner of Internal Revenue proof that the said foreign government allows similar tax exemptions to the Philippine Embassy or its personnel on their purchases of goods or services in that foreign country. As per the updated list of the DFA indorsed to this Bureau by the Office of Protocol of the DFA on September 13, 2011, the Philippine Embassy, its diplomatic and non-diplomatic personnel in Berlin, Germany are accorded refund on VAT paid on goods and services, except VAT paid on purchases of foodstuffs (including in restaurants and cafes) and tobacco products, and on purchase of motor vehicles thereat. Accordingly, the Embassy of Germany is now included in the list of diplomatic missions and other entities entitled to VAT exemption in the Philippines on the basis of reciprocity. This Office, therefore, is of the opinion as it hereby rules that the Embassy of Germany, its diplomatic and non-diplomatic personnel in Manila are exempt from VAT on the purchase of goods and services, including the local purchase of motor vehicles, in the Philippines on the basis of reciprocity. cAaTED Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue