ITAD Ruling No. 077-03

June 9, 2003 ITAD RULING NO. 077-03 Sec 108 & 109 of the Tax Code 1997; Article 34, Vienna Convention BIR Ruling No. 206-93 Embassy of Brazil 16th Floor, Liberty Center Building 104 H.V. Dela Costa Street Salcedo Village, Makati City Gentlemen : This has reference to your Note No. 021 dated May 8, 2003 referred to this Office by the Immunities and Privileges Division, Office of Protocol of the Department of Foreign Affairs (DFA), requesting for exemption from payment of value-added tax (VAT) and ad valorem tax on a locally purchased car specifically described hereunder, for the official use of the Embassy of Brazil: Make: Honda Accord Sedan A/T Model Year: 2002 Color: Nighthawk Black Chassis Number: PADCF96601V300092 Engine Number: PALP56-1300904 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 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, both of the National Internal Revenue Code of 1997. CcAESI However, applying the principle of reciprocity and based on the favorable indorsement of the Office of Protocol, Department of Foreign Affairs dated May 13, 2003, this Office may grant VAT exemption to the Embassy of Brazil in view of the representation of the latter that the Philippine Embassy in Brazil presently enjoys tax exemption in its acquisition of imported and local vehicles. It is also represented that in the last ten (10) years, the Philippine Embassy in Brazil has acquired six (6) tax-free vehicles. Hence, the local purchase of one (1) Honda Accord Sedan A/T for the official use of the Embassy of Brazil is exempt from VAT and ad valorem taxes. (BIR Ruling No. 206-93 dated May 11, 1993) Very truly yours, Commissioner of Internal Revenue By: (SGD.) MILAGROS V. REGALADO Assistant Commissioner Legal Service