ITAD Ruling No. 100-02

May 22, 2002 ITAD RULING NO. 100-02 Sec. 108 & 109 of the Tax Code 1997; Article 34, Vienna Convention BIR Ruling ITAD-031-02 Embassy of the Russian Federation 1245 Acacia Road, Dasmarias Village Makati City Attention: Mr. Leonty D. Mikhaylov Second Secretary Gentlemen : This has reference to the Indorsement letter dated May 8, 2002 referred to this Office by the Department of Foreign Affairs, Office of Protocol, requesting for exemption from payment of value added tax (VAT) and ad valorem tax on the local purchase of one (1) Nissan Exalta GS Grandeur specifically described as follows: Type of Use : Official Make : Nissan Exalta GS Grandeur, 1.6 A/T Model Year : 2002 Color : Cinnabar red Chassis Number : CDGALSAN16-A24484 Engine Number : QG16-001037 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 value added tax (VAT) and ad valorem taxes 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, and ad valorem taxes under Section 149, both of the National Internal Revenue Code of 1997. However, applying the principle of reciprocity, this Office may grant VAT and ad valorem tax exemption to the Embassy of the Russian Federation or 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 September 4, 2001 that your Government allows similar exemption to Philippine Embassy personnel on their purchase of goods and services in your country. Hence, the local purchase of one (1) Nissan Exalta GS Grandeur, 1.6 A/T for the official use of the Embassy of the Russian Federation is exempt from VAT and ad valorem taxes. (BIR Ruling No. ITAD-031-02 dated March 22, 2002). Very truly yours, (SGD.) MILAGROS V. REGALADO Assistant Commissioner Legal Service