ITAD Ruling No. 049-05

June 6, 2005 ITAD RULING NO. 049-05 Sec 106 & 108 of the Tax Code 1997; Article 34, Vienna Convention on Diplomatic Relations BIR Ruling No. 19-05 Embassy of the Russian Federation 1245 Acacia Road, Dasmarias Village Makati City Attention: Mr. Alexey Safonov Attach Gentlemen : This has reference to your Note Verbale No. 34 dated April 28, 2005 referred to this Office by the Department of Finance (DOF) and the Department of Foreign Affairs (DFA),Office of Protocol, requesting for exemption from payment of value-added tax (VAT) on the local purchase of one (1) Toyota Corolla Altis 1.6 E A/T, for the personal use of Mr. Alexey Safonov, Attach of the Embassy of the Russian Federation, specifically described as follows: Type of Use: Personal Make: Toyota Corolla Altis 1.6 E A/T Model Year: 2005 Chassis Number: ZZE121-8015293 Engine Number: 3ZZ-4413445 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 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 of the National Internal Revenue Code of 1997. However, applying the principle of reciprocity, this Office may grant VAT exemption to the Embassy of the Russian Federation 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 the Philippine Embassy and/or its personnel on their purchase of goods and services in your country. AcHEaS Hence, the local purchase of one (1) 2005 Toyota Corolla Altis 1.6 E A/T for the personal use of Mr. Alexey Safonov of the Embassy of the Russian Federation is exempt from VAT. (BIR Ruling No. ITAD-19-05 dated March 11, 2005) Very truly yours, (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service