ITAD Ruling No. 024-01

March 12, 2001 ITAD RULING NO. 024-01 Sec. 106 & Sec. 108 of the 1997 Tax Code BIR Ruling No. 206-93 Embassy of Australia P.O. BOX 1274 MCC Makati, Metro Manila Gentlemen : This refers to your Note No. 213/2000 dated June 5, 2000 which was referred to this Office by the Department of Foreign Affairs (DFA), relative to your request for a certification of Value-Added Tax (VAT) Exemption on the purchases of goods and services based on the principle of reciprocity. 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) 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 VAT prescribed under Sections 106 and 108, and ad valorem tax under Section 149, all of the National Internal Revenue Code of 1997. However, based on reciprocity, this Office may grant exemption to the Embassy of Australia and/or its personnel on their local purchases of goods and/or services, provided that you can submit to the Commissioner of Internal Revenue or his duly authorized representative a copy of the special legislation or international agreement showing that the Government of Australia allows similar tax exemption to the Philippine Embassy and its personnel on their purchases of goods and services in that foreign territory, (BIR Ruling No. 206-93 dated May 11, 1993) Per your Note PRB 00/345 dated July 13, 2000 of Australian Department of Foreign Affairs and Trade (DFAT), your Government has granted to the Philippine Embassy and its personnel in Canberra a tax exemption under the Indirect Tax Concession Scheme (ITCS) covering the Goods and Services Tax (GST), Luxury Car Tax (LCT) and Wine Equalisation Tax (WET) which are akin, if not equivalent, to VAT and ad valorem taxes on local purchases of goods and/or services. EHSIcT Hence, the Embassy of Australia and its personnel are entitled to VAT and ad valorem tax exemption on their purchase of local goods and/or services. Very truly yours, Commissioner of Internal Revenue By: (SGD.) LILIAN B. HEFTI Deputy Commissioner Legal and Inspection Group