ITAD Ruling No. 100-05

September 8, 2005 ITAD RULING NO. 100-05 Sec 106 & 108, Sec 149 of the Tax Code 1997; Article 34, Vienna Convention on Diplomatic Relations VAT Ruling NO. 002-97, BIR Ruling No. DA-ITAD-44-05 Embassy of the People's Republic of China 4896 Pasay Road, Dasmarias Village, Makati City Attention: Ms. Chen Li Second Secretary Gentlemen : This has reference to your Note No. (05) PG-287 dated August 26, 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) and ad valorem tax on the local purchase of one (1) motor vehicle, for the personal use of Ms. Chen Li, Second Secretary of the Embassy of the People's Republic of China, specifically described as follows: Make: Ford Focus 1.8L A/T Model Year: 2005 Color: Jeans Blue Engine Number: BD000323 Chassis Number: PE163L0351AM00151 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; "xxx xxx xxx" Thus, the tax exemption privilege of an Embassy and its diplomatic agents does not include exemption from value-added tax (VAT) and ad valorem tax 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 tax under Section 149, all of the National Internal Revenue Code of 1997. However, applying the principle of reciprocity, this Office may grant exemption to the Embassy of the People's Republic of China and/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 June 3, 2005 and as confirmed by the Office of the Protocol (DFA) in its Indorsement letter dated August 26, 2005, that your Government allows similar exemption to Philippine Embassy and its personnel on their purchase of goods and services in your country. Hence, the local purchase of one (1) unit of 2005 Ford Focus 1.8L A/T for the personal use of Ms. Chen Li, Second Secretary of the Embassy People's Republic of China is exempt from value-added tax and ad valorem tax (VAT Ruling No. 002-97, dated January 17, 1997 and BIR Ruling No. DA-ITAD-44-05 dated May 19, 2005) Very truly yours, (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service