ITAD BIR Ruling No. 318-11

December 15, 2011 ITAD BIR RULING NO. 318-11 Sec. 109 of the NIRC of 1997; Section 10, Article III, Vienna Convention on the Privileges and Immunities of the Specialized Agencies of the United Nations United Nations-World Food Programme (UN-WFP) 5/F G.C. Corporate Plaza #150 Legazpi Street, Legazpi Village 1226, Makati City Attention: Dragoslav Djuraskovic Logistics Officer Gentlemen : This refers to your Note No. WFP/ADM/0153/2011 dated August 24, 2011 indorsed to this Office by the Department of Finance (DOF) and the Department of Foreign Affairs (DFA), requesting exemption from value-added tax (VAT) and ad valorem tax on the local purchase of one (1) motor vehicle, for the official use of the United Nations-World Food Programme (UN-WFP), specifically described as follows: Make: Toyota Camry 2.4V A/T Model Year: 2011 Color: White Pearl Engine Number: 2AZ-E220366 Chassis Number: MR053BK4007046229 In reply, please be informed that Section 109 of the National Internal Revenue Code of 1997 (NIRC of 1997), as amended provides as follows: "SEC. 109. Exempt Transactions. Subject to the provisions of Subsection (2) hereof, the following transactions shall be exempt from the value-added tax: xxx xxx xxx (K) Transactions which are exempt under international agreements to which the Philippines is a signatory or under special laws, except those under Presidential Decree No. 529;" In relation thereto, Article III, Section 10 of the Convention on the Privileges and Immunities of the Specialized Agencies of the United Nations dated November 21, 1947 (UN Convention) provides: TEcADS "Article III xxx xxx xxx Section 10 While the specialized agencies 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 specialized agencies are making important purchases for official use of property on which such duties and taxes have been charged or chargeable, States parties to this Convention will, whenever possible, make appropriate administrative arrangements for the remission or return of the amount of duty or tax. . . . 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 specialized agency. 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. 1 Such being the case, and since UN-WFP is a specialized agency of the UN, this Office is of the opinion and so holds that aforementioned purchase of one (1) unit 2011 Toyota Camry 2.4 V A/T for the official use of UN-WFP, is exempt from VAT. It is hereby understood that this exemption applies only to vehicles purchased under the name of UN-WFP for its official use. As for the sale made by a VAT-registered business establishment to the qualified international organization, it shall enjoy the benefit of zero percent (0%) VAT pursuant to Section 106 (A) (2) (c) of the NIRC of 1997. 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. CSaIAc Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue Footnotes 1. BIR Ruling No. ITAD-46-07 dated 11 April 2007 citing VAT Ruling No. 143-90 which revoked VAT Ruling No. 176-89.