ITAD Ruling No. 071-01

August 29, 2001 ITAD RULING NO. 071-01 Sec. 108 & 109 of the Tax Code 1997; Article 34, Vienna Convention BIR Ruling ITAD-135-00 DA-ITAD-71-01 Embassy of Malaysia 107 Tordesillas Street Salcedo Village P.O. Box 2984 (MCPO) 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 payment of value added tax (VAT) and ad valorem tax on a local purchase of a motor vehicle, for the personal use of Mdme. Radziah Ismail, Administrative Assistant of the Embassy of Malaysia of one (1) Honda City 1.3 LXi A/T specifically described as follows: Type of use: Personal Make: Honda City 1.3 LXi A/T Model year: 2001 Color Ruby Red Chassis Number: PAD3A 1640XV102689 Engine Number: P3RD6-P302696 In reply, please be informed that pursuant to Article 34 of the Vienna Convention on Diplomatic Relations, pertinent portion of which reads: AHaDSI "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 Embassy of Malaysia 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 City 1.3 LXi A/T, for the personal use of Mdme. Radziah Ismail, Administrative Assistant of the Embassy of Malaysia is exempt from VAT and ad valorem tax. (BIR Ruling No. ITAD-135 00 dated February 4, 2000) Very truly yours, (SGD.) EDMUNDO P. GUEVARA Deputy Commissioner Legal and Inspection Group