ITAD Ruling No. 151-04

December 20, 2004 ITAD RULING NO. 151-04 Sec 108 & 109 of the Tax Code 1997; Article 34, Vienna Convention BIR Ruling ITAD-43-99 Embassy of Japan 2627 Roxas Blvd., Pasay City, Manila Gentlemen : This has reference to your Note Verbale No. 583-04 dated November 18, 2004 referred to this Office by the Department of Finance and the Department of Foreign Affairs, requesting for a tax-free purchase on one (1) unit of locally assembled motor vehicle for the personal use of Ms. Hiroko Taniguchi, First Secretary of the Embassy of Japan, specifically described as follows: Type of Use: Personal Make: Toyota Corolla Altis 1.8E A/T Model Year: 2004 Chassis Number: ZZE122-9003144 Engine Number: IZZ-4367032 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. CTSDAI However, applying the principle of reciprocity, this Office may grant VAT exemption to the Embassy of Japan 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. Hence, the local purchase of one (1) 2004 Toyota Corolla Altis 1.8E A/T, for the personal use of Ms. Hiroko Taniguchi of the Embassy of Japan is exempt from VAT. (BIR Ruling No. ITAD-43-99 dated November 9, 1999) Very truly yours, (SGD.) MILAGROS V. REGALADO Assistant Commissioner Legal Service