ITAD Ruling No. 150-05

November 30, 2005 ITAD RULING NO. 150-05 Sec 106 & 108, Sec 149 of the Tax Code 1997; Article 34, Vienna Convention on Diplomatic Relations BIR Ruling No. DA-465-98 Royal Netherlands Embassy 9th Floor, King's Court Building 2129 Don Chino Roces Ave. Makati City Gentlemen : This has reference to your Note No. MAN/CZ/133 dated October 26, 2005 referred to this Office by the Department of Finance (DOF) and the Department of Foreign Affairs (DFA), requesting for the exemption from payment of value-added tax (VAT) and ad valorem tax on the purchase of one (1) locally-assembled motor vehicle, for the official use of the Royal Netherlands Embassy, specifically described as follows: Make: Toyota Innova 2.0 G Gas A/T Model Year: 2005 Color: Quick Silver Engine Number: 1TR-6111123 Chassis Number: TGN40-5003946 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 goods or 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) and ad valorem tax on its purchases of locally-assembled motor vehicles. In other words, purchases by that Embassy and its diplomatic agents of locally-assembled motor vehicles shall be subject to the value-added tax prescribed under Sections 106 and 108, and ad valorem tax under Section 149, all of the National Internal Revenue Code of 1997. THCASc However, applying the principle of reciprocity, this Office may grant VAT exemption to the Royal Netherlands Embassy and/or its personnel on their purchases of locally-assembled motor vehicles it appearing from the list submitted by the Department of Foreign Affairs as of October 18, 2005, that your Government allows similar exemption to Philippine Embassy and/or its personnel on their purchase of locally-assembled motor vehicles in your country. Hence, the local purchase of one (1) unit of 2005 Toyota Innova 2.0 G Gas A/T for the official use of the Royal Netherlands Embassy is exempt from value-added tax. In addition, exemption from ad valorem tax may also be availed of on said purchase upon favorable indorsement of the DFA of the same. This ruling is issued on the basis of the facts as represented. However, if upon investigation it shall be disclosed that the facts are different, then this ruling shall be without force and effect insofar as the herein parties are concerned. Very truly yours, (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service