ITAD Ruling No. 110-04

October 12, 2004 ITAD RULING NO. 110-04 Sec 108 & 109 of the Tax Code 1997; Article 34, Vienna Convention BIR Ruling No. DA-322-97 Royal Embassy of Saudi Arabia 389 Sen. Gil J. Puyat Avenue Extension Makati City Attention: Mr . Mohammed Ameen Wali Ambassador Gentlemen : This has reference to your Note No. 969 dated September 1, 2004 referred to this Office by the Department of Finance and the Department of Foreign Affairs (DFA), requesting for a tax-free purchase on one (1) unit of local motor vehicle for the official use of the Royal Embassy of Saudi Arabia, specifically described as follows: Make: Ford Everest 4x4 Automatic Transmission Model Year: 2004 Color: Champagne Silver VIN Number: MNCLS4D404W107611 Engine Number: WLAT488490 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 Royal Embassy of Saudi Arabia 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 22, 2004 that your Government allows similar exemption to Philippine Embassy or its personnel on their purchase of goods and services in your country. Hence, the local purchase of one (1) Ford Everest AT for the official use of the Royal Embassy of Saudi Arabia is exempt from VAT. (BIR Ruling No. DA-322-97 dated September 24, 1997) CTDHSE Very truly yours, (SGD.) MILAGROS V. REGALADO Assistant Commissioner Legal Service