ITAD Ruling No. 044-05

May 19, 2005 ITAD RULING NO. 044-05 Sec 106 & 108 of the National Internal Revenue Code of 1997; Article 34, Vienna Convention; VAT Ruling No. 002-97 Embassy of the People's Republic of China 4896 Pasay Road, Dasmarias Village Makati City Attention: Mr. Chen Jiandong Second Secretary Gentlemen : This has reference to your Note Verbale No. (05) PG-095 dated April 7, 2005, indorsed 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 of one (1) locally purchased motor vehicle specifically described hereunder, for the personal use of Mr. Chen Jiandong, Second Secretary of the Embassy of the People's Republic of China: Make: Toyota Camry 3.0 V6 A/T Model Year: 2005 Color: Extreme Black Engine Number: 1MZ-1749959 Chassis Number: MCV30-4500297 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, both of the National Internal Revenue Code of 1997. ADCETI However, applying the principle of reciprocity, this Office may grant VAT exemption to the Embassy of the People's Republic of China 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 and VAT Ruling No. 002-97 1 dated January that your Government allows similar exemption to the Philippine Embassy and its personnel on their purchases of goods and services in your country. Hence, the herein local purchase of one (1) Toyota Camry 3.0 V6 A/T, for the personal use of Mr. Chen Jiandong, Second Secretary of the Embassy of the People's Republic of China is exempt from VAT. (BIR Ruling No. DA-ITAD-002-97 dated January 17, 1997) Very truly yours, (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service Footnotes 1. Per Note dated July 2, 1996 which is duly confirmed by the Assistant Secretary, Office of the Protocol, Department of Foreign Affairs, Manila, in his Indorsement dated July 5, 1996, the Chinese Government on the basis of reciprocity, grants VAT exemption to the Philippines Embassy in Beijing, and the Consulate General in Xiamen as well as to their personnel on their purchases of goods and services, telephone bills, gasoline (diesel),and rental payments/expenses for the residence of its staff."