ITAD Ruling No. 051-03

April 8, 2003 ITAD RULING NO. 051-03 Sec 108, 109 & 149 of the Tax Code 1997; Article 34, Vienna Convention BIR Ruling No. DA-322-97 Royal Embassy Of Saudi Arabia 389 Sen. Gil J. Puyat Avenue Extension, Makati City Gentlemen : This has reference to your Note No. 51 dated March 10, 2003 referred to this Office by the Immunities and Privileges Division, Office of Protocol of the Department of Foreign Affairs (DFA), requesting for the exemption from payment of VAT and ad valorem taxes on the local purchase of a motor vehicle, for the official use of the Royal Embassy of Saudi Arabia of one (1) 2002 Honda Accord 2.0 Li VTi-L A/T specifically described as follows: Make: Honda Accord 2.0 Li VTi-L A/T Model year: 2002 Chassis Number: PADCF96601V300075 Engine Number: PALP56-1300880 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 goods or 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 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, and ad valorem taxes under Section 149, all of the National Internal Revenue Code of 1997. However, applying the principle of reciprocity, this Office may grant exemption to the Royal Embassy of Saudi Arabia or its personnel on their local purchases of goods and/or services it appearing from the list submitted by the Department of Foreign Affairs that your Government allows similar exemption to Philippine Embassy personnel on their purchase of goods and services in your country. Hence, the sale of one (1) Honda Accord 2.0 Li VTi-L A/T, for the official use of the Royal Embassy of Saudi Arabia is exempt from value added tax (VAT) and ad valorem taxes. ( BIR Ruling No. 322-97 dated September 24, 1997 ) ASIDTa Very truly yours, (SGD.) MILAGROS V. REGALADO Assistant Commissioner Legal Service