ITAD Ruling No. 132-05

November 15, 2005 ITAD RULING NO. 132-05 Sec 106 & 108 of the Tax Code 1997; Article 34, Vienna Convention on Diplomatic Relations BIR Ruling No. DA-ITAD-37-03 Embassy of Malaysia 107 Tordesillas Street Salcedo Village P.O. Box 2948 (MCPO) Makati City Gentlemen : This has reference to your letter dated August 4, 2005 referred to this Office by the Department of Finance (DOF) and the Department of Foreign Affairs (DFA), requesting for exemption from payment of value-added tax (VAT) on the local purchase of a motor vehicle, for the personal use of H.E. Iskandar Sarudin, Ambassador of the Embassy of Malaysia, specifically described as follows: Type of use: Personal Make: Kia Picanto 1.1 Automatic Hatchback Model year: 2005 Color: Silver Chassis Number: KNABA24335T183665 Engine Number: G4HG5992717 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 the goods and services; xxx xxx xxx" Thus, the tax exemption privilege of an Embassy and its diplomatic agents does not include exemption from value added tax (VAT) on its local purchases of goods, services and/or motor vehicles. In other words, purchases by that Embassy and its diplomatic agents of goods, services and/or motor vehicles shall be subject to the value added tax prescribed under Sections 106 and 108 of the National Internal Revenue Code of 1997. However, applying the principle of reciprocity, this Office may grant exemption to the Embassy of Malaysia and/or its personnel on their purchases of locally-assembled motor vehicle in the Philippines it appearing from the list with File No. 28050 submitted by the Department of Foreign Affairs as of October 18, 2005, that your Government allows similar exemption to the Philippine Embassy and/or its personnel on their purchases of motor vehicle in your country. SATDEI Hence, the local purchase of one (1) unit of 2005 Kia Picanto 1.1 Automatic Hatchback, for the personal use of H.E. Iskandar Sarudin, Ambassador of the Embassy of Malaysia is exempt from VAT. (BIR Ruling No. DA-ITAD-37-03 dated February 19, 2003) Very truly yours, (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service