ITAD Ruling No. 081-05

August 15, 2005 ITAD RULING NO. 081-05 Sec. 106 and 108 of the Tax Code 1997; Article 34, Vienna Convention on Diplomatic Relations VAT Ruling No. 008-00 Embassy of the Federal Republic of Germany 6TH Floor, Solid Bank Building 777 Paseo de Roxas, Makati City Attention: Ms. Ina Elise Edith Dhring-Patel First Secretary (Consular) Gentlemen : This has reference to your Note Verbale KFZ No. 46/05 dated July 14, 2005 referred to this Office by the Department of Finance (DOF) and the Department of Foreign Affairs (DFA), requesting for the exemption from payment of value-added tax (VAT) on the local purchase of a motor vehicle, for the personal use of Ms. Ina Elise Edith Dhring-Patel, First Secretary (Consular) of the Embassy of the Federal Republic of Germany, specifically described as follows: Make: Mitsubishi Grandis 2.4 A/T Model Year: 2005 Color: Warm Silver (A36) Frame Number: MMBLRNA405F000938 Engine Number: 4G69LB5782 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; CSEHcT "xxx xxx xxx" Thus, the tax exemption privilege of an Embassy and its diplomatic agents does not include exemption from VAT on its local purchases of goods and services. In other words, purchases by that Embassy and its diplomatic agents 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 exemption to the Embassy of the Federal Republic of Germany and 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 June 3, 2005, that your Government allows similar exemption to the Philippine Embassy and its personnel on their purchases of goods and services in your country. Hence, the local purchase of one (1) unit of 2005 Mitsubishi Grandis 2.4 A/T for the personal use of Ms. Ina Elise Edith Dring-Patel, First Secretary (Consular) of the Embassy of the Federal Republic of Germany is exempt from VAT. (VAT Ruling No. 008-00 dated February 7, 2000) Very truly yours, (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service