ITAD BIR Ruling No. 314-12

August 10, 2012 ITAD BIR RULING NO. 314-12 Article 34, Vienna Convention on Diplomatic Relations The Royal Thai Embassy 107 Thailand (Rada) Street Legaspi Village, Makati City Gentlemen : This refers to the request for value-added tax (VAT) exemption on the local purchase of goods and services by the Royal Thai Embassy 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 May 29, 2012 letter of the Office of Protocol of the Department of Foreign Affairs on the updates from the Philippine Foreign Service Posts, the Philippine Embassy is exempt from VAT on its purchase of goods, services and motor vehicles in Bangkok, Thailand. However, its VAT exemption on utilities requires an amount of at least BHT8500 (excluding VAT per transaction) . The VAT exemption on purchase of motor vehicles also extended to the diplomatic personnel of the embassy. Accordingly, The Royal Thai Embassy is now included in the list of diplomatic missions and other entities entitled to VAT exemption in the Philippines on the basis of reciprocity. DaAIHC This Office, therefore, is of the opinion as it hereby rules that The Royal Thai Embassy in Manila, exclusive of its diplomatic and non-diplomatic personnel, is exempt from VAT on the purchase of goods and services, EXCEPT that, exemption on utilities requires an amount of at least BHT8500 (excluding VAT) per transaction . Moreover, the said embassy and its diplomatic personnel are also exempt from VAT on local purchase of motor vehicles in the Philippines, on the basis of reciprocity. Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue