ITAD Ruling No. 045-01

April 25, 2001 ITAD RULING NO. 045-01 Art. 34, Vienna Convention on Diplomatic Relations; Sections 106 and 108, NIRC BIR Ruling No. 206-93 Embassy of the Islamic Republic of Pakistan 6th Floor Alexander House, 132 Amorsolo St. Legaspi Village, Makati Gentlemen : This refers to your Note NO. TX-ref/1-2000 dated January 22, 2001 which was referred to this Office by the Department of Foreign Affairs relative to your request for exemption from the value-added tax (VAT) on items purchased at the Pilipinas Makro, Inc. 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 the goods and 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 service. 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, based on reciprocity, this Office may grant exemption to the Embassy of The Islamic Republic of Pakistan on its local purchases of goods and/or services it appearing from the list submitted by the Department of Foreign Affairs dated February 22, 2001 and in its Indorsement dated February 13, 2001 that your Government allows similar exemption to the Philippine Embassy on its purchase of goods and services in your country. (BIR Ruling 206-93 dated May 11, 1993) Hence, the Embassy of The Islamic Republic of Pakistan is entitled to VAT exemption on its local purchase of goods and/or services. Very truly yours, Commissioner of Internal Revenue By: (SGD.) EDMUNDO P. GUEVARA Deputy Commissioner Legal and Inspection Group