ITAD Ruling No. 073-05

July 26, 2005 ITAD RULING NO. 073-05 Secs. 106 & 108 of the Tax Code 1997; Article 34, Vienna Convention on Diplomatic Relations BIR Ruling No. DA-ITAD-95-04 Embassy of Papua New Guinea 3rd Floor, Corinthian Plaza Bldg. Paseo de Roxas, Legaspi Village Makati City Gentlemen : This has reference to your Note Verbale Nos. 24/2005, 25/2005, and 26/2005 dated April 14, 2005, May 10, 2005 and May 17, 2005, respectively, referred to this Office by the Department of Finance (DOF) and the Department of Foreign Affairs (DFA), requesting for exemption from payment of value-added tax (VAT) on the local purchase of two (2) motor vehicles, for the official use of the Embassy of Papua New Guinea, specifically described as follows: Make: Toyota Camry 3.0V V6 A/T Model Year: 2005 Chassis No.: MCV30-4500373 Engine No.: 1MZ-1796836 Make: Toyota Innova 2.0G A/T Model Year: 2005 Chassis No.: TGN40-5002006 Engine No.: ITR-6070577 In reply, please be informed that Article 34 of the Vienna Convention on Diplomatic Relations 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" Thus, the tax exemption privilege of an Embassy and its diplomatic agents does not include exemption from the value-added tax (VAT) on their 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 of the National Internal Revenue Code of 1997. However, applying the principle of reciprocity, this Office may grant VAT exemptions to the Embassy of Papua New Guinea 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 January 19, 2005 that your Government allows similar exemption to Philippine Embassy and its personnel on their purchases of goods and services in your country. aATCDI Hence, the herein local purchase of two (2) units of Toyota vehicles as replacements for the previously purchased vehicles for the official use of the Embassy of Papua New Guinea are hereby exempt from VAT. (BIR Ruling No. DA-ITAD-95-04 dated August 31, 2004) Very truly yours, (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service