ITAD Ruling No. 077-00

July 4, 2000 ITAD RULING NO. 077-00 Sec. 106 Sec. 108 Sec. 149 BIR-ITAD 64-00 71-00 Royal Thai Embassy 107 Rada St., Legaspi Village Makati City Attention: Mr . Chirakom Kitiyakara Minister Counsellor Commercial Section Gentlemen : This pertains to your Note No. 40001/430 dated April 19, 2000 which was referred to this Office by the Department of Foreign Affairs, requesting for a tax free local purchase of one (1) unit Honda City Model 2000, 1.3 LXi A/T, 4-door sedan, 1.3 liter gas, SOHC, PGM-FI, 4-speed automatic transmission, 95 h.p., Cond. St. No. 13 TNH, Engine No. P3RD6-P301703, Frame No. PAD3A1640XV101652, kaiser silver color, for the personal use of Mr. Chirakom Kitiyakara, Minister Counsellor of the Commercial Section of the Embassy. In reply, please be informed that pursuant to Article 34 of the Vienna Convention on Diplomatic Relations pertinent portions of which read: "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 tax on their local purchases of goods and services. In other words, purchases by the Embassy of goods and services shall be subject to VAT prescribed under Sections 106 and 108, and ad valorem tax under Section 149, both of the National Internal Revenue Code of 1997. However, under the principle of reciprocity, this Office may grant VAT and ad valorem tax exemption to the Royal Thai Embassy and its personnel on their local purchases of goods and services, it appearing from the list submitted by the Department of Foreign Affairs dated October 4, 1999 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) unit Honda City Model 2000, 1.3 LXi A/T, for the personal use of Mr. Chirakom Kitiyakara, Minister Counsellor of the Commercial Section of the Embassy, is exempt from VAT and ad valorem tax. (ITAD Ruling 71-00 dated May 4, 2000) Very truly yours, (SGD.) LILIAN B. HEFTI Deputy Commissioner Legal and Inspection Group