ITAD Ruling No. 063-02

April 24, 2002 ITAD RULING NO. 063-02 NIRC, Sec. 106 VAT Ruling No. 146-90 BIR Ruling No. 318-93 International Labour Organization NEDA sa Makati Bldg., 106 Amorsolo St. Legaspi Village, Makati City Attention: Warner Konrad Blenk Director Gentlemen : This refers to your letter dated October 15, 2001 requesting for tax exemption on the purchase of one (1) unit Honda CRV 2.0 M/T Model 2000, with Chassis No. PADRD1720YV202340 and Engine No PEWD2-Y302327, for the personal use of Mr. David James Lamotte (Mr. Lamotte),Senior Enterprise and Management Development Specialist of the International Labour Organization (ILO). It is represented that Mr. Lamotte purchased the above Honda CRV from Ms. Francesca Agnello, Poverty Reduction Specialist of Asian Development Bank (ADB) and a tax-exempt person who therefore purchased the above motor vehicle without paying particularly the value-added tax (VAT). It is now your contention that Mr. Lamotte's purchase of the above motor vehicle is not subject to VAT because of Article 3 of the Convention on the Privileges and Immunities of the Specialized Agencies of the United Nations to which the Philippines is a signatory, which provides: "Article III Property, Funds and Assets "Section 10. "While the specialized agencies, will not, as a general rule, claim exemption from excise duties and from taxes on the sale of movable and immovable property which form part of the price to be paid, nevertheless when the specialized agencies are malting important purchases for the official use of property on which such duties and taxes have been charged or chargeable, States parties to this Convention will, whenever possible, make appropriate administrative arrangements for the remission or return of the amount of duty or tax.' According to the above-quoted provision, only the United Nations specialized agency's official purchases of goods and services in the Philippines are accorded exemption from indirect taxes such as the VAT imposed under Section 106 of the Tax Code of 1997. Accordingly, the said exemption from VAT is not applicable in this case since the purchase is not made by ILO for its official use but rather by Mr. Lamotte for his personal use. ( VAT Ruling No. 146-90 dated May 24, 1990 ) AHacIS On the other hand, though Ms. Agnello was exempted from VAT when she purchased the motor vehicle, such exemption was no more than a mere suspension of payment. VAT must be paid eventually if the motor vehicle is sold later on to a non-privileged person. (BIR Ruling No. 318-93) Thus, the sale by Ms. Agnello of the subject motor vehicle to Mr. Lamotte who is a non-privileged person and for his personal use is subject to VAT. Finally, with respect to the computation of the amount of VAT payable, we have endorsed the same to the Large Taxpayers Audit and Investigation Division 2 for processing. Relative thereto, please address your communication to the following: The Division Chief Large Taxpayers Audit and Investigation Division 2 Rm. 203 Bureau of Internal Revenue National Office Bldg.,Diliman, Quezon City Tel No. 9265588/9224824 Fax No. 922-4770 Very truly yours, Commissioner of Internal Revenue By (SGD.) MILAGROS V. REGALADO Assistant Commissioner Legal Service