ITAD Ruling No. 005-02

January 23, 2002 ITAD RULING NO. 005-02 Sections 106, 108 & 149 of the Tax Code 1997; Article 34, Vienna Convention BIR Ruling No. ITAD-79-01 New Zealand Embassy 23rd Floor Far East Bank Center Sen. Gil Puyat Avenue Makati City Attention: Mr. Graeme McGuire First Secretary and Consul Gentlemen : This has reference to your letter dated November 15, 2001 referred to this Office by the Department of Foreign Affairs (DFA), requesting for exemption from payment of value-added tax (VAT) and ad valorem tax on a locally purchased car specifically described hereunder, for the official use of the New Zealand Embassy: Make: Honda CRV 2.0 A/T 5 door sedan, gas, 2.0li, PGM-FI 4-speed automatic transmission, 150 hp) Model Year: 2001 Color: Heather Mist Silver Chassis Number: PADRD 18301V307902 Engine Number: PEWD7-1407922 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 taxes under Section 149, all of the National Internal Revenue Code of 1997. However, applying the principle of reciprocity, this Office may grant VAT and ad valorem tax exemption to the New Zealand 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 as of September 4, 2001 that your Government allows similar exemption to the Philippine Embassy and its personnel on their purchase of goods and services in your country. Hence, the local purchase of one (1) Honda CRV 2.0A/T, for the official use of the New Zealand Embassy is exempt from VAT and ad valorem taxes. (BIR Ruling No. ITAD-79-01 dated September 21, 2001) IASCTD Very truly yours, (SGD.) MILAGROS V. REGALADO Assistant Commissioner Legal Service