ITAD Ruling No. 025-05

March 30, 2005 ITAD RULING NO. 025-05 Sec. 106 & 108 of the Tax Code 1997; Article 34, Vienna Convention BIR Ruling No. DA-ITAD-77-03 Embassy of the Federative Republic of Brazil 16th Floor, Liberty Center Building 104 H.V. Dela Costa Street Salcedo Village, Makati City Gentlemen : This has reference to your Note No. 016 dated February 23, 2005 referred to this Office by the Department of Finance (DOF) and the Department of Foreign Affairs (DFA),Office of Protocol, requesting for exemption from payment of value-added tax (VAT) on a locally purchased car specifically described hereunder, for the official use of the Embassy of the Federative Republic of Brazil: Make: Toyota Camry 2.4 V A/T Model Year: 2005 Chassis Number: ACV30-9001543 Engine Number: 2AZ1635671 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 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, both of the National Internal Revenue Code of 1997. DCcTHa However, applying the principle of reciprocity and based on the favorable indorsement of the Office of Protocol, Department of Foreign Affairs dated February 28, 2005, this Office may grant VAT exemption to the Embassy of the Federative Republic of Brazil in view of the representation of the latter that the Philippine Embassy in Brazil presently enjoys tax exemption in its acquisition of imported and local vehicles. It is also represented that in the last ten (10) years, the Philippine Embassy in Brazil has acquired tax-free vehicles. Hence, the local purchase of one (1) 2005 Toyota Camry 2.4V A/T for the official use of the Embassy of the Federative Republic of Brazil is exempt from VAT. (BIR Ruling No. DA-ITAD-77-03 dated June 9, 2003) Very truly yours, (SGD.) JOSE MARIO C. BUAG Deputy Commissioner Legal and Inspection Group