ITAD Ruling No. 033-99

October 7, 1999 ITAD RULING NO. 033-99 Sec. 106 Sec. 108 206-93 087-97 Embassy of Finland 21st Floor, Far East Bank and Trust Center, Sen. Gil Puyat Avenue corner Makati Avenue, Makati City Gentlemen : This refers to your letter dated February 22, 1999, to the Department of Foreign Affairs (DFA), regarding the request of the Embassy of Finland for a Certification of Value-added Tax (VAT) Exemption. In reply, please be informed that while Article 34 of the Vienna Convention on Diplomatic Relations of 1961 exempts diplomatic agents from all dues and taxes, personal or real, national, regional or municipal, they are nevertheless subject to the indirect taxes of a kind which are normally incorporated in the price of goods or services, e.g., ad valorem tax and VAT. However, under the principle of reciprocity, this Office may grant tax exemption to the embassy of a foreign state and to the members of diplomatic missions on their local purchases of goods and services, provided that they 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 said foreign government allows similar tax exemptions to the Philippine Embassy or its personnel on their purchases of goods or services in that foreign country. (BIR Ruling No. 206-93 dated May 11, 1993) However, as per the letter dated February 1, 1999 submitted by the Office of Protocol of the DFA to this Office, Finland is not included among the list of diplomatic missions entitled to VAT exemption in the Philippines on the basis of reciprocity. This considering, it is required that a DFA certification to the effect that indirect tax (e.g. VAT) exemption is granted to the members of diplomatic missions of the Philippines in Finland be secured, before the same privilege of exemption from payment of VAT be accorded the members of Finlands diplomatic missions in the Philippines. (BIR Ruling 087-97 dated August 5, 1997) Very truly yours, (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner Legal and Enforcement Group