ITAD BIR Ruling No. 307-13

November 13, 2013 ITAD BIR RULING NO. 307-13 Section 106 (A) (2), 1997 NIRC, as amended; Section 8, Article II, UN Convention of 1946 Wilfredo R. Cuyugan Assistant Secretary Office of Protocol Department of Foreign Affairs 2330 Roxas Blvd., Pasay City 1300 Dear Director Ibayan, This refers to Note Verbale No. MNL/121/2013/AL dated 24 April 2013 of the United Nations High Commissioner for Refugees (UNHCR) requesting exemption from value-added tax (VAT) on its local purchase of two (2) units of 2012 Toyota Fortuner for its official use, specifically described as follows: DSAICa Make Color Engine Number Chassis Number 2012 Fortuner Freedom 1 KD-6989908 MHFYZ59GX04002874 4x4 V DSL AT White 2012 Fortuner Freedom 1 KD-6989908 MHFYZ59GX04002874 4x4 3.0V DSL AT White It is represented that UNHCR is an integral part of the United Nations (UN); that in Resolution 319 (IV) of 3 December 1949, the UN General Assembly decided to establish a High Commissioner's Office for Refugees as of 1 January 1951; that the Statute of the Office of the UNHCR (High Commissioner) was adopted by the General Assembly on 14 December 1950 as Annex to Resolution 428 (V); that the High Commissioner reports annually to the General Assembly; that pursuant to paragraph 4 of the Statute, an Advisory Committee on Refugees was established by the Economic and Social Council and was later reconstituted as the United Nations Refugee Fund (UNREF) Executive Committee; that the latter was replaced in 1958 by the Executive Committee of the High Commissioner's Programme; that members of the Executive Committee are elected by the Economic and Social Council on the widest possible geographical basis from those States with a demonstrated interest in and devotion to the solution of refugee problems; that under its terms of reference, the Executive Committee, inter alia , reviews and approves the material assistance programme of the High Commissioner's office and advises the High Commissioner at his or her request on the exercise of his or her functions under the Statute; that the Executive Committee was originally composed of 24 states including the Philippines. In reply, please be informed that Section 106 (A) (2) of the 1997 National Internal Revenue Code (NIRC), as amended, provides that sales by VAT-registered persons to persons or entities whose exemption under special laws or international agreements to which the Philippines is a signatory shall be subject to zero percent (0%) rate, thus: "Section 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 ICHAaT (ii) National government deficit as a percentage of GDP of the previous year exceeds one and one-half percent (1 1/2%). . . . (2) Zero-rated Sales 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. xxx xxx xxx" In relation thereto, Section 08, Article II of the Convention on the Privileges and Immunities of the United Nations (UN Convention) adopted by the General Assembly of the United Nations on 13 February 1946 applies. It provides: "Article II Property, Funds and Assets xxx xxx xxx SEC. 8. While the United Nations will not, as a general rule, claim exemption from excise duties and from taxes on the sale of movable and immovable property which form part of the price to be paid, nevertheless when the United Nations is making important purchases for official use of property on which such duties and taxes have been charged or are chargeable, Members will, whenever possible, make appropriate administrative arrangements for the remission or return of the amount of duty or tax. xxx xxx xxx" The aforecited provision of the UN Convention clearly requires that to be entitled to a possible remission or return of the amount of duty or tax, the subject purchase must be for official use of the UN. But in lieu of remission or return of the amount of duty or tax related to the purchase for official use, a tax exemption privilege is instead granted. HEacDA In view of all of the foregoing, this Office is of the opinion and hereby holds that the herein purchase of two (2) units 2012 Toyota Fortuner for the official use of UNHCR, an exempt entity pursuant to Section 109 (K) of the NIRC, as amended, in relation to Section 8, Article II of the UN Convention, shall be subject to VAT at zero percent (0%) rate pursuant to Section 106 (A) (2) (c) of the 1997 NIRC, as amended. It is hereby understood that the tax privilege herein accorded applies only to vehicles purchased under the name of UNHCR for its official use. 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