ITAD Ruling No. 006-01

February 12, 2001 ITAD RULING NO. 006-01 Section 106 Section 108 Section 149 DA-177-99 206-93 British Embassy 15-17th Floor, LV LOCSIN Building 6752 Ayala Avenue 1226 Makati City Attention: Ms . Jo Ann Saltiga Management Assistant Gentlemen : This refers to your letter dated September 20, 2000 requesting reconsideration of BIR Ruling No. ITAD-131-00da ted Se ptember 15, 2000, to the effect that the purchase of one (1) unit Honda CRV 2.0 A/T 2000 Model with Engine No. PEWD7-Y306271 and Chassis No. PADRD 1830YV206285 for the British Embassy Defence Section is exempt from both value-added tax (VAT) and ad valorem tax, as the said ruling is limited to exemption from VAT. It is represented that VAT and ad valorem tax are not levied on the Philippine Embassy in the United Kingdom on their purchase of motor vehicles; that there are only two types of taxes applicable to suppliers of motor cars in the UK, namely: customs duty levied at 10 percent and value-added tax levied 17.5 percent; and that for the past two years, the Embassy purchased locally 3 tax free cars wherein this Office granted VAT and ad valorem tax exemptions. In reply, please be informed that pursuant to Article 34 of the Vienna Convention On Diplomatic Relations, pertinent portions of which read: "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 do not include exemption from value-added tax (VAT) and ad valorem tax 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(A) and 108, and the ad valorem tax under Section 149, all of the National Internal Revenue Code of 1997. CcAESI However, under the principle of reciprocity, this Office may grant VAT and ad valorem tax exemption to the British 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 dated June 2, 2000 and pursuant to the British guide to protocol matters entitled "Your Posting to London" that your Government allows similar exemption to Philippine Embassy and its personnel on their purchase of goods and services in your country. (BIR Ruling DA-177-99 dated March 23, 1999 and BIR Ruling No. 206-93 dated May 11, 1993) Hence, the local purchase of one (1) unit Honda CRV 2.0 A/T, 2000 Model for the British Embassy Defence Section is exempt from value-added and ad valorem taxes. Very truly yours, Commissioner of Internal Revenue By: (SGD.) LILIAN B. HEFTI Deputy Commissioner Legal and Inspection Group