ITAD Ruling No. 008-05

February 3, 2005 ITAD RULING NO. 008-05 Article 34, Vienna Convention BIR Ruling No. ITAD-139-02 Delegation of the European Commission 7th Floor, Salustiana D. Ty Tower 104 Paseo de Roxas, Legaspi Village Makati City Gentlemen : This refers to your Note No. 05/006 dated January 10, 2005, endorsed to this Office by the Department of Foreign Affairs, requesting for issuance of the Value-Added Tax Exemption Certificates (VEC) to therein enumerated officials for any functions they may undertake, be it the sale, purchase and importation of goods and services in the Philippines. 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 a member of a Diplomatic Mission does not include exemption from value-added tax (VAT) on its local purchases of goods and services. In other words, purchases by that Diplomatic Mission of goods and/or services shall be subject to the value-added tax prescribed under Sections 106 and 108 of the National Internal Revenue Code of 1997. It must be noted, however, that the Agreement between the Commission of the European Communities and the Government of the Republic of the Philippines On the Establishment and the Privileges and Immunities of the Delegation of the European Communities in the Republic of the Philippines pertinently provides as follows: "Article 3 1. The Delegation of the Commission, its head and its members, as well as the member of their families forming part of their respective households, shall, on the territory of the Republic of the Philippines, enjoy such rights, privileges and immunities and be subject to such obligations as correspond to those laid down in the Vienna Convention of 18 April 1961 on Diplomatic Relations and respectively accorded to and assumed by Diplomatic Missions accredited to the Republic of the Philippines, the heads and members of those Missions, as well as the members of their families forming part of their respective households. 2. The other provisions of the Vienna Convention of 18 April 1961 on Diplomatic Relations shall be applicable mutatis mutandis . 3. Those rights and diplomatic privileges and immunities shall be accorded on condition that, in conformity with the provisions of Article 17 of the Protocol on the privileges and immunities of the European Communities annexed to the treaty establishing a single Council and a single Commission of the European Communities done at Brussels on 8 April 1965, the Member States of the European Communities accord the same rights and diplomatic privileges and immunities to the Mission of the Republic of the Philippines, to its head and to its members as well as to the members of their families forming part of their respective households " (emphasis supplied) It is clear from the above that Diplomatic Missions are entitled to exemption from direct taxes as provided under Article 34 of the Vienna Convention on Diplomatic Regulations. As regards indirect taxes, this Office may grant VAT exemption based on reciprocity to the head of the Diplomatic Mission and its members including the members of their families forming part of their respective households on their local purchases of goods and/or services in the Philippines. SHaATC Based on the list of embassies and diplomatic missions exempt from VAT in the Philippines as of January 19, 2005, which includes the Delegation of the European Commission, issued by the Office of Protocol of the Department of Foreign Affairs, the following Member States of the Delegation have diplomatic relations and accord the same rights and diplomatic privileges and immunities to the Mission of the Republic of the Philippines in their respective countries: Netherlands, Belgium, Italy, Germany, Austria, Great Britain and Northern Ireland. Therefore, pursuant to the aforequoted provisions and applying the principle of reciprocity, this Office hereby grants VAT exemption to the following officials of the Delegation of the European Commission on their local purchases of goods and for services in the Philippines: 1) H.E. Jan DE KOK Ambassador, Head of the Delegation (Dutch) 2) Mrs. Akenese DE KOK wife of the Ambassador (Dutch) 3) Mr. Luc VANDEBON First Counsellor (Economic & Political Affairs) (Belgian) 4) Mrs. Martha VANDEBON wife of First Counsellor (Economic & Political Affairs) (Belgian) 5) Mr. Frank HESS First Secretary (Operations) (German) 6) Mrs. Shu-Hui, HSIAO wife of First Secretary (Operations) (German) 7) Mr. Guy PLATTON First Secretary (Finance & Contracts) (Belgian) 8) Mrs. Marleen Mortier PLATTON wife of First Secretary (Finance & Contracts) (Belgian) 9) Mr. Roger DE BACKER First Secretary (Operations) (Belgian) 10) Mrs. Martine M. SUAIN wife of First Secretary (Operations) (Belgian) 11) Ms. Monica Belalcazar WEISS Third Secretary (Austrian) 12) Mr. Wallace HARLAND Attach (Administration) (British) 13) Mrs. Sabine HARLAND wife of Attach (Administration) (British) 14) Mr. Gabor BARNA Attach (Finance & Contracts) (Belgian) 15) Mr. Ren SIERON Attach (Operations) (German) 16) Ms. Antonella CULASSO Assistant Attach (Italian) For your guidance. Very truly yours, Commissioner of Internal Revenue By: (SGD.) JOSE MARIO C. BUAG Deputy Commissioner Legal & Inspection Group