ITAD Ruling No. 079-00

July 6, 2000 ITAD RULING NO. 079-00 Sec. 106 Sec. 108 Sec. 149 BIR-ITAD 34-99 The Embassy of the People's Republic of Bangladesh 106 Paseo de Roxas cor. Perea St. Makati City Gentlemen : This refers to your Note No. MISC-1/98 dated February 1, 2000 which was referred to this Office by the Department of Foreign Affairs, requesting for the issuance of a certificate of exemption from value-added tax (VAT) and other government taxes for items purchased by the Embassy from local markets/shops. 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 the goods and services xxx xxx xxx" the tax exemption privilege of an Embassy and its diplomatic agents does not include exemption from VAT and ad valorem taxes 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, all of the National Internal Revenue Code of 1997. However, under the principle of reciprocity, this Office may grant tax exemption to the Embassy of the Peoples Republic of Bangladesh and its personnel on their local purchases of goods and services, it appearing from the lists submitted by the Department of Foreign Affairs (dated October 4, 1999 in the case of VAT, and dated June 15, 1994 in the case of ad valorem tax) that your Government allows similar exemption to Philippine Embassy personnel on their purchase of goods and services in your country. Hence, the Embassy of the Peoples Republic of Bangladesh and its personnel are entitled to VAT and ad valorem tax exemption on their local purchases of goods and services. (BIR-ITAD Ruling No. 34-99) Very truly yours, (SGD.) LILIAN B. HEFTI OIC, Deputy Commissioner Legal and Inspection Group