ITAD Ruling No. 019-05

March 11, 2005 ITAD RULING NO. 019-05 Sec 106 & 108, Sec 149 of the Tax Code 1997; Article 34, Vienna Convention BIR Ruling No. 070-03 Embassy of the Russian Federation 1245 Acacia Road, Dasmarias Village Makati City Gentlemen : This has reference to your Note Verbale No. 4 dated January 18, 2005 and Note Verbale No. 10 dated February 7, 2005 referred to this Office by the Department of Finance (DOF) and the Department of Foreign Affairs, Office of Protocol, requesting for exemption from payment of value added tax (VAT) and ad valorem tax on the local purchase of one (1) Ford Escape XLS 4x2 2.3L A/T, for the official use of the Embassy and as a replacement to the carnapped Toyota Land Cruiser, specifically described as follows: Type of Use: Official Make: Ford Escape 4x2 2.3L A/T Model Year: 2004 Chassis Number: PE2ET67151WA00706 Engine Number: L3608788 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; 2005cdtai "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 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, and ad valorem tax 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 Embassy of the Russian Federation 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 January 19, 2005 that your Government allows similar exemption to the Philippine Embassy and/or its personnel on their purchase of goods and services in your country. Hence, the local purchase of one (1) 2004 Ford Escape XLS 4x2 2.3L A/T for the official use of the Embassy of the Russian Federation is exempt from VAT and ad valorem taxes. (BIR Ruling No. ITAD-070-03 dated May 6, 2003) HSIDTE Very truly yours, (SGD.) JOSE MARIO C. BUAG Deputy Commissioner Legal and Inspection Group