ITAD Ruling No. 118-05

October 18, 2005 ITAD RULING NO. 118-05 Sec. 106 & 108, Sec. 149 of the Tax Code 1997; Article 34, Vienna Convention BIR Ruling No. DA-ITAD-141-04 Royal Embassy Of Saudi Arabia 389 Sen. Gil J. Puyat Avenue Extension Makati City Attention: Mr. Ahmed A.H. Al-Tuwaijry Attach Gentlemen : This has reference to your Note No. 1143 dated September 19, 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 Mr. Ahmed A.H. Al-Tuwaijry, Attach of the Royal Embassy of Saudi Arabia, specifically described as follows: Make: Toyota Corolla Altis 1.8G A/T Model Year: 2005 Color: Metallic Silver Chassis Number: ZZE122L-9003883 Engine Number: 1ZZ-4494097 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, tax exemption privilege of an Embassy and its diplomatic agents does not include exemption from the value-added tax (VAT) and ad valorem tax on its local purchases of goods and services. In other words, purchases by that Embassy and its diplomatic agents 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. aIAEcD However, applying the principle of reciprocity, this Office may grant exemption to the Royal Embassy of Saudi Arabia 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 Protocol and State Visits (DFA) and the Department of Finance in their Indorsement letters dated September 20, 2005 and September 28, 2005, respectively, 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 Toyota Corolla Altis 1.8G A/T for the personal use of Mr. Ahmed A.H. Al-Tuwaijry, Attach of the Royal Embassy of Saudi Arabia is exempt from VAT and ad valorem tax. (BIR Ruling No. DA-ITAD-141-04 dated December 9, 2004) Very truly yours, (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service