ITAD Ruling No. 061-01

July 26, 2001 ITAD RULING NO. 061-01 Sec 108 & 109 of the Tax Code 1997; Article 34, Vienna Convention BIR Ruling ITAD-35-00 DA-ITAD- 061-01 Canadian Embassy Ninth Floor Allied Bank Center 6754 Ayala Avenue Makati City Gentlemen : This has reference to your letter dated June 18, 2001 referred to this Office by the Department of Foreign Affairs (DFA), requesting for exemption from a tax-free local purchase of a motor vehicle, one (1) Honda Accord 2.3 VTi-L A/T specifically described as follows: HSDaTC Type of use: Official Make: Honda Accord 2.3 VTi-L A/T (4 door sedan, gas, 2254cc., VTEC, 4-speed automatic transmission, 157 hp) Model year: 2001 Color: Taffeta White Chassis Number: PADCG 5650YV200712 Engine Number: PAHP5-Y200712 In reply, please be informed that pursuant to Article 34 of the Vienna Convention on Diplomatic Relations, pertinent portion of which reads: aDcHIS "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) and ad valorem taxes 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, both of the National Internal Revenue Code of 1997. However, applying the principle of reciprocity, this Office may grant VAT and ad valorem tax exemption to the Canadian Embassy 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 February 22, 2001 that your Government allows similar exemption to Philippine Embassy personnel on their purchase of goods and services in your country. Hence, the local purchase of one (1) Honda Accord 2.3 VTi-L A/T, for the official use of the Canadian Embassy is exempt from VAT and ad valorem. (BIR Ruling No. ITAD-35-00 dated February 4, 2000) Very truly yours, (SGD.) EDMUNDO P. GUEVARA Deputy Commissioner Legal and Inspection Group