ITAD Ruling No. 043-05

May 19, 2005 ITAD RULING NO. 043-05 Sec 106, 108 & 149 of the National Internal Revenue Code of 1997; Article 34, Vienna Convention; BIR Ruling No. 003-99 British Embassy 15th-17th Floors L.V. Locsin Building 6752 Ayala Avenue cor. Makati Avenue Makati City Gentlemen : This has reference to your Note No. 37-05 dated March 17, 2005 referred to this Office by the Department of Finance (DOF) and the Office of Protocol and State Visits, Department of Foreign Affairs (DFA), requesting for a tax-free purchase on a local motor vehicle for the official use of the British Embassy, specifically described as follows: Make: Yamaha Wonderbike Model XT225 Model Year: 2001 Color: Green Engine Number: 5EV-000788 Frame Number: 5EV-000788 In reply, please be informed that Article 34 of the Vienna Convention on Diplomatic Relations 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" Thus, 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 the value-added tax prescribed under Sections 106 and 108, and ad valorem taxes under Section 149, all of the National Internal Revenue Code of 1997. However, applying the principle of reciprocity, this Office may grant exemptions to the British Embassy and/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 January 19, 2005 that your Government allows similar exemption to Philippine Embassy and/or its personnel on their purchases of goods and services in your country. SCaIcA Hence, the herein local purchase of one (1) Yamaha Wonderbike for the official use of the British Embassy is exempt from VAT and ad valorem tax. (ITAD Ruling No. 003-99 dated July 8, 1999) Very truly yours, (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service