ITAD Ruling No. 150-04

December 20, 2004 ITAD RULING NO. 150-04 Sec 108 & 109 of the Tax Code 1997; Article 34, Vienna Convention BIR Ruling ITAD-43-99 British Embassy 17th Floor Locsin Building 6752 Ayala Avenue, Makati City Gentlemen : This has reference to your Note No. 184-04 dated October 25, 2004 referred to this Office by the Department of Finance and the Department of Foreign Affairs, Office of Protocol, requesting for a tax-free purchase on the three (3) units of locally purchased motor vehicles for the official use of the British Embassy, specifically described as follows: Make/Model/Year: 2003 Ford Expedition XLT Color: Oxford White Chassis Number: 1FMRU15W53LA68727 Engine Number: 3LA68727 Make/Model/Year: 2003 Chevrolet Suburban 4 x 2 Color: Black Chassis Number: 1GNEC16T94T11072 Engine Number: 4J11072 Make/Model/Year: 2004 Chevrolet Trailblazer EXT Color: Summit White Chassis Number: 1GNET16S046228148 Engine Number: 46228148 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 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 VAT prescribed under Sections 106 and 108, both of the National Internal Revenue Code of 1997. EDISTc However, applying the principle of reciprocity, this Office may grant VAT exemption to the British Embassy and/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 June 22, 2004 that your Government allows similar exemption to the Philippine Embassy and its personnel on their purchases of goods and services in your country. acCDSH Hence, the local purchases of three (3) motor vehicles described above for the official use of the British Embassy are exempt from VAT. (BIR Ruling No. ITAD-43-99 dated November 9, 1999) Very truly yours, (SGD.) MILAGROS V. REGALADO Assistant Commissioner Legal Service