ITAD Ruling No. 037-03

February 19, 2003 ITAD RULING NO. 037-03 Sec 108 & 109 of the Tax Code 1997; Article 34, Vienna Convention BIR Ruling ITAD-135-00 Embassy of Malaysia 107 Tordesillas Street Salcedo Village P.O. Box 2948 (MCPO) Makati City Attention: Mr. Ahmad Azizan Zakaria Administrative Assistant Gentlemen : This has reference to your letter dated December 17, 2002 referred to this Office by the Department of Foreign Affairs (DFA), requesting for exemption from payment of value added tax (VAT) on the local purchase of a motor vehicle, for the personal use of Mr. Ahmad Azizan Zakaria, Minister Counsellor of the Embassy of Malaysia of one (1) 1999 Honda City 1.3 A/T specifically described as follows: Make: Honda City 1.3 LXi A/T Model year: 2002 Chassis Number: PAD3A16401V403760 Engine Number: P3RD6-1403790 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. However, applying the principle of reciprocity, this Office may grant VAT exemption to the Embassy of Malaysia or its personnel on their local purchases of goods and/or services it appearing from the list submitted by the Department of Foreign Affairs as of September 4, 2001 that your Government allows similar exemption to Philippine Embassy personnel on their purchase of goods and services in your country. EIaDHS Hence, the sale of one (1) Honda City 1.3 LXi A/T, for the personal use of Mr. Ahmad Azizan Zakaria, Administrative Assistant of the Embassy of Malaysia is exempt from VAT. ( BIR Ruling No. ITAD-135-00 dated February 4, 2000 ) Very truly yours, (SGD.) MILAGROS V. REGALADO Assistant Commissioner Legal Service