ITAD Ruling No. 017-05

March 3, 2005 ITAD RULING NO. 017-05 Sec 106 & 108 of the Tax Code 1997; Article 34, Vienna Convention BIR Ruling No. 34-99 Embassy of the Republic of South Africa Suite 1, c/o Oakwood Premier Suites Ayala Center, Makati City Gentlemen : This has reference to your Note Verbale No. Phil/02/05 dated January 14, 2005 referred to this Office by the Department of Finance (DOF) and the Department of Foreign Affairs (DFA),requesting for a tax-free purchase of one (1) locally purchased motor vehicle specifically described hereunder; for the official use of the Embassy of the Republic of South Africa: Make: Mitsubishi Space Gear L400 Model Year: 2004 Chassis No.: W5038161 Engine No.: 4G64A034839 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 goods or services; "xxx xxx xxx" the tax exemption privilege of an Embassy and its diplomatic agents does not include exemption from the value-added tax (VAT) on its 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 of the National Internal Revenue Code of 1997. However, applying the principle of reciprocity, this Office may grant VAT exemptions to the Embassy of the Republic of South Africa and/or its personnel on their local purchases of goods and/or services starting January 19, 2005, it appearing from the list submitted by the Department of Foreign Affairs as of said date that your Government allows similar exemption to Philippine Embassy and its personnel on their purchases of goods and services in your country. Hence, the herein local purchase of one (1) 2004 Mitsubishi Space Gear L400 for the official use of the Embassy of South Africa is exempt from VAT. (BIR Ruling No. DA-ITAD-34-99 dated October 18, 1999) HDaACI Very truly yours, (SGD.) JOSE MARIO C. BUAG Deputy Commissioner Legal & Inspection Group