ITAD Ruling No. 130-02

August 2, 2002 ITAD RULING NO. 130-02 Secs. 108 & 109 of the Tax Code 1997; Article 34, Vienna Convention BIR Ruling ITAD-8-02 Embassy Of Australia 1st Floor, Doa Salustiana Dee Ty Tower 104 Paseo de Roxas Makati City Gentlemen : This has returnee to your letter dated May 22, 2001 referred to this Office by the Department of Foreign Affairs (DFA), requesting for exemption from payment of value added tax (VAT) and ad valorem tax on the purchase of a motor vehicle by the Philippine Australian Short Term Training Facility (PASTT), Australian Embassy of one (1) 2002 Honda CRV 2.0 A/T specifically described as follows: Make: Honda CRV 2.0 A/T Model year: 2002 Chassis Number: PRLD83-2000581 Engine Number: PADRD48302V000588 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 the goods and services; "xxx xxx xxx" the tax exemption privilege of an Embassy and its diplomatic agents does not include exemption from value added tax (VAT) and ad valorem taxes 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 taxes under Section 149, all of the National Internal Revenue Code of 1997. However, applying the principle of reciprocity, this Office may grant VAT and ad valorem tax exemption to the Australian Embassy 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 September 4, 2001 that your Government allows similar exemption to Philippine Embassy personnel on their purchase of goods and services in your country. Hence, the sale of one (1) Honda CRV 2.0 A/T, for the Official use of the Philippine Australian Short Term Training Facility (PASTT) of the Australian Embassy is exempt from VAT and ad valorem. ( BIR Ruling No. ITAD-8-02 dated January 25, 2002 ) Very truly yours, (SGD.) MILAGROS V. REGALADO Assistant Commissioner Legal Service