ITAD Ruling No. 037-00

2000 ITAD RULING NO. 037-00 Philippine Long Distance Telephone Company Ramon Cojuangco Building Makati Avenue, Makati City Attention: Atty . Rene G . Baez FVP-Support Services and Tax Sector S i r : This refers to your letter dated March 12, 1999 requesting for confirmation of the value-added tax exemption on the telecommunication services being rendered by the Philippine Long Distance Telephone Company (PLDT) to foreign embassies. In reply, please be informed that pursuant to Art. 34 of the Vienna Convention on Diplomatic Relations, pertinent portions of which read: "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 and services xxx xxx xxx" the tax exemption privilege of an Embassy and its diplomatic agents does not include exemption from the 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 VAT prescribed under Section 106 and 108 of the National Internal Revenue Code of 1997. However, under the principle of reciprocity, such sales may be treated as exempt, provided that the embassy of the foreign state or the members of diplomatic mission purchasing the said products 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 grants similar tax exemption to the Philippine Embassy or its personnel in the purchases of goods and services in that foreign country. (VAT Ruling No. 42-98) In accordance with the listing dated October 4, 1999, prepared by the Office of Protocol of the Department of Foreign Affairs, the following diplomatic missions are entitled to VAT exemptions in the Philippines on the basis of reciprocity: 1. Embassy of the Argentine Republic 2. Embassy of Australia 3. Embassy of the Republic of Austria 4. Embassy of the Peoples Republic of Bangladesh 5. Royal Belgian Embassy 6. Embassy of the Federative Republic of Brazil 7. Embassy of Brunei Darusalam 8. Canadian Embassy 9. Embassy of the Republic of Chile 10. Embassy of the Peoples Republic of China 11. Embassy of the Czech Republic 12. Royal Danish Embassy 13. Embassy of the Arab Republic of Egypt 14. Embassy of the France 15. Embassy of the Federal Republic of Germany 16. Embassy of the Holy See (Apostolic Nunciature)) 17. Embassy of the Republic of India 18. Embassy of the Republic of Indonesia 19. Embassy of the Islamic Republic of Iran 20. Embassy of the Republic of Iraq 21. Embassy of the State of Israel 22. Embassy of the Republic of Italy 23. Embassy of Japan 24. Embassy of the Republic of Korea 25. The Peoples Bureau of the Great Socialist Peoples Libyan Arab Janhiriya 26. Embassy of Malaysia 27. Embassy of the United Mexican States 28. Embassy of the Union of Myanmar 29. Royal Netherlands Embassy 30. Embassy of Federal Republic of Nigeria 31. Royal Norwegian Embassy 32. Embassy of the Islamic Republic of Pakistan 33. Embassy of the State of Qatar 34. Embassy of Romania 35. Embassy of the Russian Federation 36. Royal Embassy of Saudi Arabia 37. Embassy of the Republic of Singapore 38. Embassy of Spain 39. Embassy of the Democratic Socialist Republic of Sri Lanka 40. Embassy of Sweden 41. Embassy of the Swiss Confederation 42. Royal Thai Embassy 43. Embassy of the Republic of Turkey 44. Embassy of the United Arab Emirates 45. Embassy of the United States of America 46. Embassy of the United Kingdom of Great Britain and Northern Island 47. Embassy of the Republic of Venezuela 48. Embassy of the Socialist Republic of Vietnam On the other hand, the following diplomatic missions are not entitled to VAT exemptions in the Philippines, it appearing that they are not included in the list of diplomatic missions entitled to VAT exemption in the Philippines on the basis of reciprocity prepared by the Office of the Protocol of the Department of Foreign Affairs: 1. Embassy of Colombia 2. Embassy of Cuba 3. Embassy of Finland 4. Embassy of the Islamic Republic of India 5. Embassy of the Hashemite Kingdom of Jordan 6. Embassy of New Zealand 7. Embassy of Panama 8. Embassy of Papua New Guinea 9. Embassy of the Yugoslavia Socialist Federal Republic However, it is noteworthy to state that the amounts paid for overseas dispatch, messages or conversation originating from the Philippines by any embassy and consular office of a foreign government are exempt from the 10% overseas communication tax imposed under Sec. 120 of the Tax Code of 1997. LexLib For your guidance and reference. Very truly yours, Commissioner of Internal Revenue By: (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner Legal and Enforcement Group