ITAD Ruling No. 153-05

December 5, 2005 ITAD RULING NO. 153-05 Section 109, National Internal Revenue Code of 1997; Agreement between International Children's Emergency Fund and the Government of the Republic of the Philippines; Convention on the Privileges and Immunities of the United Nations, Adopted by the General Assembly of the United Nations; BIR Ruling No. ITAD-048-00 United Nations Children's Emergency Fund 31/F Yuchengco Tower, RCBC Plaza 6819 Ayala Avenue cor. Sen. Gil Puyat Avenue 1200 Makati City Attention: Mr. Roberto F. Bilgera Operations Officer Gentlemen : This refers to your letter (Ref: MA/DFA/2005-056) dated May 18, 2005 indorsed to this Office by the Office of Protocol and State Visits of the Department of Foreign Affairs (DFA),requesting value-added tax (VAT) exemption on a locally purchased motor vehicle of Ms. Foroogh Foyouzat, Project Officer/Section Head, of the Child Protection Unit of the United Nations [UN] Children's Emergency Fund (UNICEF),Manila. In reply, please be informed that Section 109 of the National Internal Revenue Code of 1997 (NIRC) provides, viz: "SEC. 109. Exempt Transactions . The following shall be exempt from the value-added tax: xxx xxx xxx (q) Transactions which are exempt under international agreements to which the Philippines is a signatory or under special laws, except those under Presidential Decree Nos. 66, 529 and 1590; (Emphasis supplied) xxx xxx xxx" Based on the above provision, the UNICEF and its personnel may only be exempt from VAT when there is an express provision to this effect in the Agreements / Conventions entered into by the Republic of the Philippines with the said agencies. In connection thereto, Article VII of the Agreement between The International Children's Emergency Fund and the Government of the Philippines dated December 7, 1960 states that: "Article VII Privileges and Immunities The Government will grant to the Fund and its personnel the privileges and immunities contained in the general convention on privileges and immunities adopted by the General Assembly of the United Nations on 13 February 1946." ADEHTS Exemption from taxes accorded under the Convention on the Privileges and Immunities of the United Nations, Adopted by the General Assembly of the United Nations (UN Convention), are embodied under Article II, Sections 7 and 8 thereof which state that: "Article II PROPERTY, FUNDS AND ASSETS xxx xxx xxx "Section 7 The United Nations, its assets, income and other property shall be: a. exempt from all direct taxes; ... xxx xxx xxx" "Section 8 While the United Nations will not, as a general rule claim exemption from excise duties and from taxes on the sale of movable and immovable property which form part of the price to be paid ,nevertheless when the United Nations is making important purchases for official use of property on which such duties and taxes have been charged or are chargeable, Members will, whenever possible, make appropriate administrative arrangements for the remission or return of the amount of duty or tax ." (Emphasis supplied) Accordingly, under the UN Convention, the UN is generally not exempt from VAT and excise taxes. However, important purchases of property for the official use of the UN shall be exempt from payment of taxes chargeable to such property (e.g. VAT). In view thereof, this Office is of the opinion that only important purchases for the official use the UNICEF and its personnel shall be exempt from VAT, and all the other purchases are subject to VAT. (BIR Ruling No. ITAD-048-00) Considering that the purchase of the motor vehicle by Ms. Foroogh Foyouzat is for personal use, it is therefore with much regret that her request for VAT exemption is hereby denied for lack of legal basis. Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service