ITAD BIR Ruling No. 337-12

September 6, 2012 ITAD BIR RULING NO. 337-12 Article 34, Vienna Convention on Diplomatic Relations Embassy of Spain 5th Floor, ACT Tower 135 Sen. Gil J. Puyat Avenue 1200 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 Spain 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 various Philippine Foreign Service Posts, refunds on VAT paid on purchase of goods, services, and motor vehicles are accorded to the Philippine Embassy in Madrid, the Philippine Consulate-General in Barcelona, their diplomatic personnel and dependent spouses. Accordingly, the Embassy of Spain is now included in the list of diplomatic missions and other entities entitled to VAT exemption in the Philippines on the basis of reciprocity. Based thereon, the Embassy of Spain and its diplomatic personnel including the latter's dependent spouses in Manila may now proceed to secure the necessary VAT exemption on the purchase of specific goods and services, including the local purchase of motor vehicles, in the Philippines on the basis of reciprocity. HDaACI Please be guided accordingly. Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue