ITAD Ruling No. 149-04

December 17, 2004 ITAD RULING NO. 149-04 Sec 108 & 109 of the Tax Code 1997; Article 34, Vienna Convention BIR Ruling No. ITAD-24-01 Australian Embassy Level 23 Tower II, RCBC Plaza 6819 Ayala Avenue Makati City Attention: Mr. Ernesto Espiritu Gentlemen : This has reference to your Note No. 0318/04 dated November 3, 2004 referred to this Office by the Department of Finance and the Department of Foreign Affairs (DFA), requesting for a tax-free purchase on one (1) unit of local motor vehicle for the official use of the Australian Embassy, specifically described as follows: Type of Use: Official Make: Kia KC2700 4x2 Panoramic with dual aircon Model Year: 2004 Color: White Frame Number: KNCSE211257039669 Engine Number: J2-395357 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 goods or services; "xxx xxx xxx" the tax exemption privilege of an Embassy and its diplomatic agents 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 VAT prescribed under Sections 106 and 108, and ad valorem taxes under Section 149, all of the National Internal Revenue Code of 1997. SEHACI However, applying the principle of reciprocity, this Office may grant exemptions to the Embassy of Australia and/or its personnel on their local purchases of goods and/or services it appearing from the list submitted by the DFA as of June 22, 2004 that your Government allows similar exemption to Philippine Embassy and its personnel on their purchases of goods and services in your country. Hence, the local purchase of one (1) Kia KC2700 4x2 Panoramic with dual aircon for the official use of the Australian Embassy is exempt from VAT and ad valorem taxes. (BIR Ruling No. ITAD-24-01 dated March 12, 2001) Very truly yours, (SGD.) MILAGROS V. REGALADO Assistant Commissioner Legal Service