ITAD Ruling No. 022-99

August 26, 1999 ITAD RULING NO. 022-99 Section 106 Section 108 206-93 Embassy of the Democratic Socialist Republic of Sri Lanka Makati City, Philippines Gentlemen : This refers to your faxed letter dated April 23, 1999, requesting for exemption from value added tax (VAT) on the purchase of goods and services such as VAT charges on the telephone, electricity, water and gasoline bills. 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) on its local purchase of goods and services. In other words, purchase by the Embassy of the Democratic Socialist Republic of Sri Lanka of goods and/or services shall be subject to the value-added tax prescribed under Section 106 and 108, both of the National Internal Revenue Code of 1997. However, under the principle of reciprocity, this Office may grant tax exemption to the embassy of a foreign state or its personnel on their local purchase of goods and/or services it appearing from the list submitted by the Department of Foreign Affairs that your Government allows similar exemption to Philippine Embassy personnel on their purchase of goods and services in your country (BIR Ruling 206-93 dated May 11, 1993). Hence, the Embassy of the Democratic Socialist Republic of Sri Lanka is entitled to VAT exemptions on their local purchases of goods and/or services. Very truly yours, Commissioner of Internal Revenue By: (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner Legal and Enforcement Group