ITAD Ruling No. 065-04

July 5, 2004 ITAD RULING NO. 065-04 Sec 106, 108 & 149 of the National Internal Revenue Code of 1997; Article 34, Vienna Convention BIR Ruling No. ITAD-24-01 Embassy of Australia 16F 2627 Roxas Boulevard Pasay City Gentlemen : This has reference to your Note No. 109/04 dated April 20, 2004, referred to this Office by the Department of Finance and the Department of Foreign Affairs (DFA), requesting for exemption from payment of ad valorem and value-added taxes (VAT) on the local purchase of a motor vehicle for the official use of the Australian Embassy/AFP, specifically described as follows: Make: Ford Everest 4X2 M/T 2.5 Intercooled Turbo Diesel Model Year: 2004 Color: Twilight Blue/Med. Gray Frame Number: MNCLS4D404W104999 Engine Number: WLAT447756 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 the 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 exemptions to the Embassy of Australia 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 the Philippine Embassy and its personnel on their purchases of goods and services in your country. Hence, the local purchase of one (1) Ford Everest 4X2 M/T 2.5 Intercooled Turbo Diesel for the official use of the Australian Embassy/AFP is exempt from VAT and ad valorem taxes. ( BIR Ruling No. ITAD-24-01 dated March 12, 2001 ) SEcITC Very truly yours, (SGD.) MILAGROS V. REGALADO Assistant Commissioner Legal Service