ITAD Ruling No. 094-04

August 31, 2004 ITAD RULING NO. 094-04 Sec 106 & 108 of the Tax Code 1997; Article 34, Vienna Convention BIR Ruling No. 15-99 Embassy of Israel 23/F Trafalgar Plaza, 105 HV dela Costa Street Salcedo Village, Makati City Gentlemen : This has reference to your Note No. MV 2321 dated June 30, 2004 referred to this Office by the Department of Finance and the Department of Foreign Affairs (DFA), requesting for a tax-free purchase of a locally assembled motor vehicle, for the official use of the Embassy of Israel, specifically described as follows: Make: Mitsubishi Adventure GLS Sport Gas M/T Model Year: 2004 Color: Monza Silver Serial Number: PAEVB2RX14B000445 Engine Number: 4G63AC3040 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 the 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. However, applying the principle of reciprocity, this Office may grant exemption to the Embassy of Israel or its personnel on their local purchases of goods and/or services it appearing from the list submitted by the Department of Foreign Affairs that your Government allows similar exemption to Philippine Embassy and its personnel on their purchases of goods and services in your country. Hence, the local purchase of one (1) Mitsubishi Adventure GLS Sport Gas M/T for the official use of the Embassy of Israel is exempt from VAT. ( BIR Ruling No. 15-99 dated August 6, 1999 ) Very truly yours, (SGD.) MILAGROS V. REGALADO Assistant Commissioner Legal Service