ITAD Ruling No. 123-05

November 7, 2005 ITAD RULING NO. 123-05 Sec 106 & 108 of the Tax Code 1997; Article 34, Vienna Convention VAT Ruling No. 008-00 New Zealand Embassy 23/F BPI Buendia Center Sen. Gil Puyat Avenue, Makati City Gentlemen : This has reference to your Note No. 46-05 dated September 23, 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) on the local purchase of one (1) motor vehicle, for the official use of the New Zealand Embassy and as replacement for their 2000 Toyota Camry, specifically described as follows: Make: Toyota Previa 2.4 Gas A/T Model Year: 2005 Color: Lithium Chassis Number: JTEGD34M2-07027608 Engine Number: 2AZ-B 156186 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/or its personnel 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 and its diplomatic agents of goods and/or services shall be subject to the value-added tax prescribed under Sections 106 and 108 of the National Internal Revenue Code of 1997. aEHAIS However, applying the principle of reciprocity, this Office may grant exemption to the New Zealand Embassy 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 the DFA's Note No. 5-2128 giving approval for the said tax-free purchase on the condition that the registration of the new vehicle may proceed only after the submission of the Report of Sale of the 2000 Toyota Camry, that your Government allows similar exemption to Philippine Embassy on their purchase of goods and services in your country. Hence, the local purchase of one (1) unit of 2005 Toyota Previa 2.4 Gas A/T for the official use of the New Zealand Embassy and as replacement for their 2000 Toyota Camry is exempt from VAT. (VAT Ruling No. 008-00 dated February 7, 2000) Very truly yours, (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service