ITAD Ruling No. 002-01

January 17, 2001 ITAD RULING NO. 002-01 Sec. 106 Sec. 108, Sec. 149 BIR Ruling No. ITAD-35-00 Canadian International Development Agency Embassy of Canada 11th Floor, Allied Bank Center 6754 Ayala Avenue Makati City Gentlemen : This refers to your letter dated September 27, 2000 requesting for a tax-free local purchase of one (1) unit Honda CR-V and one (1) unit Toyota Tamaraw FX Revo for the official use of Business Advisory Project in the Philippines (BAP) of the Canadian International Development Agency (CIDA) of the Embassy of Canada. In reply, please be informed that pursuant to Article 34 of the Vienna Convention on Diplomatic Relations, pertinent portion of which reads: "ARTICLE 34 "A diplomatic agent shall be exempt from all dues and taxes, personal or real, national, regional or municipal, except: "(a) indirect taxes of a kind which are normally incorporated in the price of the goods and services "xxx xxx xxx" the tax exemption privilege of an Embassy and its diplomatic agents does not include exemption from value added tax (VAT) and ad valorem taxes on their local purchases of goods and services. In other words, purchases by that Embassy of goods and/or services shall be subject to the value added tax prescribed under Sections 106 and 108, and ad valorem tax under Section 149, both of the National Internal Revenue Code of 1997. However, under the principle of reciprocity, this Office may grant exemptions to the Canadian Embassy or its personnel on their local purchases of goods and/or services it appearing from the list submitted by the Department of Foreign Affairs that your Government allows similar exemption to Philippine Embassy personnel on their purchase of goods and services in your country. AcDaEH Hence, the local purchase of one (1) unit Honda CR-V and one (1) unit Toyota Tamaraw FX Revo for the official use of Business Advisory Project in the Philippines (BAP) of the Canadian International Development Agency (CIDA) of the Embassy of Canada is exempt from VAT and ad valorem taxes based on reciprocity. (BIR Ruling ITAD No. 35-00 dated February 4, 2000) Very truly yours, (SGD.) LILIAN B. HEFTI Deputy Commissioner Legal & Inspection Group