ITAD Ruling No. 049-01

May 17, 2001 ITAD RULING NO. 049-01 Arts. 32 & 60, Vienna Convention on Consular Relations; Section 173, NIRC Embassy of the Republic of Singapore 6/F, ODC International Plaza Building 219 Salcedo Street, Legaspi Village Makati City Attention: Ms . Angeline Thangaperakasam Third Secretary Gentlemen : This refers to your letter dated April 7, 2000 requesting confirmation of your opinion that the Embassy of the Republic of Singapore is exempted from payment of documentary stamp tax, transfer tax and the registration tax on its purchase of real property. cAEDTa It is represented that the Singapore Embassy is currently in the final stages of negotiations to purchase a new chancery; and that it seeks clarification as to its exemption from payment of taxes and other tax consequences of the above transaction. In reply, please be informed of Article 32 in relation to Article 60 of the Vienna Convention on Consular Relations dated April 18, 1961 pertinent portions of which read "ARTICLE 32 EXEMPTION FROM TAXATION OF CONSULAR PREMISES "1. Consular premises and the residence of the career head of consular post of which the sending State or any person acting on its behalf is the owner or lessee shall be exempt from all national, regional or municipal dues and taxes whatsoever other than such as represent payment for specific services rendered. "2. The exemption from taxation referred to in paragraph 1 of this Article shall not apply to such dues and taxes if under the law of the receiving State, they are payable by the person who contracted with the sending State or with the person acting on its behalf." "ARTICLE 60 "EXEMPTION FROM TAXATION OF CONSULAR PREMISES "1. Consular premises of a consular post headed by an honorary consular officer of which the sending State is the owner or lessee shall be exempt from all national, regional or municipal dues and taxes whatsoever, other than such as represent payment for specific services rendered. 2. The exemption from taxation referred to in paragraph 1 of this Article shall not apply to such dues and taxes if, under the laws and regulations of the receiving State, they are payable by the person who contracted with the sending State." Based on the aforequoted provision of the Convention, the Embassy of the Republic of Singapore is exempt from payment of internal revenue taxes for which it is directly liable, i.e. documentary stamp taxes. However, Section 173 of the Tax Code of 1997, provides among others, that whenever one party to the taxable document enjoys exemption from the documentary stamp tax, the other party thereto who is not exempt shall be the one directly liable to the tax. Accordingly, the seller shall be the party directly liable for the payment of the documentary stamp tax considering that the Embassy is tax-exempt. The Embassy is not liable to pay the capital gains tax since this is a tax imposed on the capital gains or income derived from the sale, exchange or other disposition of real property classified as capital asset. Accordingly, the seller or the other party who realized capital gains from the transaction shall be the party directly liable for the payment of the capital gains tax. As regards the exemption of the Embassy with respect to transfer tax (local government tax), real estate tax and registration fee, please address your query to the Department of the Interior and Local Government-Finance which has jurisdiction on the matter. HcDSaT Very truly yours, (SGD.) REN G. BAEZ Commissioner of Internal Revenue