ITAD Ruling No. 146-05

November 25, 2005 ITAD RULING NO. 146-05 Secs 106 & 108 of the Tax Code 1997; Article 34, Vienna Convention on Diplomatic Relations BIR Ruling No. DA-ITAD-37-04 Embassy of Spain 5th Floor, ACT Tower, 135 Sen. Gil Puyat Avenue, Makati City Gentlemen : This has reference to your Note No. 129 dated October 21, 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 purchase of one (1) locally-assembled motor vehicle, for the official use of the Agencia Espaola de Cooperacin Internacional (AECI), Agency for International Cooperation of the Embassy of Spain, specifically described as follows: Type of use: Official Make: Mitsubishi Montero Sports 4x4 Model year: 2005 Color: White Solid Chassis Number: JMYORK9705J001168 Engine Number: 4M40GT9538 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/or 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/or 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. aHTDAc However, applying the principle of reciprocity, this Office may grant exemption to the Embassy of Spain 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 and as confirmed by the Office of the Protocol (DFA) in its letter dated November 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. Hence, the local purchase of one (1) unit of 2005 Mitsubishi Montero Sports 4x4, for the official use of the Agencia Espaola de Cooperacin Internacional (AECI), Agency for International Cooperation of the Embassy of Spain is exempt from VAT. (BIR Ruling No. DA-ITAD-37-04 dated April 20, 2004) Very truly yours, (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service