ITAD Ruling No. 050-05

June 6, 2005 ITAD RULING NO. 050-05 Sec 106 & 108 of the Tax Code 1997; Article 34, Vienna Convention on Diplomatic Relations BIR Ruling No. DA-ITAD-34-99 Embassy of the Republic of Angola 22nd Floor, The Peak Tower 107, L.P. Leviste, Salcedo Village, Makati City Gentlemen : This refers to your letter dated May 24, 2005, endorsed to this Office by the Department of Foreign Affairs (DFA),requesting for value added-tax (VAT) exemption on its lease of an office space in Makati for the Chancery of the Embassy of the Republic of Angola and the issuance of the Value-Added Tax Exemption Certificates (VEC) to the Embassy of the Republic of Angola. 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 the goods and 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 VAT prescribed under Sections 106 and 108, of the National Internal Revenue Code of 1997. However, under the principle of reciprocity, this Office may grant exemptions to the Embassy of the Republic of Angola 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 May 25, 2005 that your Government allows similar exemption to the Philippine Embassy and its personnel on their purchase of goods and services in your country. SaDICE Therefore, pursuant to the aforementioned provisions and applying the principle of reciprocity, this Office is of the opinion and so holds that the lease of an office space for the use of the Chancery of the Embassy of the Republic of Angola is exempt from VAT. (BIR Ruling No. DA-ITAD-34-99 dated October 18, 1999) Very truly yours, (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service