ITAD Ruling No. 097-00

August 2, 2000 ITAD RULING NO. 097-00 Section 106 Section 108 ITAD 13-9 Embassy of Finland 21st Floor, Far East Bank and Trust Center Sen. Gil Puyat Avenue corner Makati Avenue, Makati City Gentlemen : This refers to your letter dated February 4, 2000, which was referred to this Office by the Department of Foreign Affairs (DFA), relative to your request for a Certification of Value-Added Tax (VAT) Exemption on purchases of goods and services based on the principle of reciprocity. 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 all 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. However, under the principle of reciprocity, this Office may grant exemptions to your embassy and its personnel on their local purchases of goods and/or services it appearing from the list submitted by the Department of Foreign Affairs dated June 02, 2000 and pursuant to Sections 127 and 128 of the 1996 VAT Code of Finland that your Government allows similar exemption to Philippine Embassy personnel on their purchase of goods and services in your country. (BIR Ruling No. 206-93 dated May 11, 1993) Hence, the Embassy of Finland and its personnel are entitled to VAT exemptions on their purchase of local goods and/or services. Very truly yours, (SGD.) LILIAN B. HEFTI Deputy Commissioner Legal & Inspection Group