ITAD Ruling No. 126-05

October 28, 2005 ITAD RULING NO. 126-05 Sec 106 & 108 of the National Internal Revenue Code of 1997; Article 34, Vienna Convention BIR Ruling No. DA-ITAD-124-03 Royal Thai Embassy 107 Rada Street Legaspi Village Makati City Gentlemen : This has reference to your Note Verbale No. 40001/787 dated September 16, 2005, indorsed to this Office by the Department of Finance (DOF) and the Office of Protocol and State Visits, Department of Foreign Affairs (DFA), requesting for a tax-free purchase of one (1) locally purchased motor vehicle specifically described hereunder, for the official use of the Royal Thai Embassy: Make: Toyota HiAce GL Grandia 2.5 M/T Model Year: 2005 Color: Silver Metallic Engine Number: 2KD-1355130 Chassis Number: JTFRS13PO-00001222 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; ASCTac "xxx xxx xxx" Thus, the tax exemption privilege of an Embassy 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 VAT exemption to the Royal Thai Embassy on its local purchases of goods and/or services it appearing from the list submitted by the Department of Foreign Affairs as of June 3, 2005 that your Government allows similar exemption to the Philippine Embassy on its purchases of goods and services in your country. Hence, the herein local purchase of one (1) Toyota HiAce GL Grandia, for the official use of the Royal Thai Embassy is exempt from VAT. (BIR Ruling No. DA-ITAD-124-03 dated July 16, 2003) Very truly yours, (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service