ITAD Ruling No. 162-05

December 21, 2005 ITAD RULING NO. 162-05 Sec 106 & 108, Sec 149 of the Tax Code 1997; Article 34, Vienna Convention on Diplomatic Relations ITAD Ruling No. 038-01 Embassy of Canada 8/F Tower 2, RCBC Plaza 6819 Ayala Avenue, Makati City Gentlemen : This has reference to your Note Nos. 1750/05 and 1756/05 dated October 7, 2005 and October 11, 2005, respectively, 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 Embassy of Canada, specifically described as follows: Make: Toyota Camry 2.4 E A/T Model Year: 2005 Color: Night Mist Engine Number: 2AZ-1919313 Chassis Number: ACV30-9001925 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 (VAT) and ad valorem tax on its purchases of locally-assembled motor vehicles. In other words, purchases by that Embassy and/or 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. However, applying the principle of reciprocity, this Office may grant VAT and ad valorem tax exemptions to the Embassy of Canada 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 and as confirmed by the Office of the Protocol (DFA) in its Indorsement letter dated December 13, 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. 06taxcdtai Hence, the local purchase of one (1) unit of 2005 Toyota Camry 2.4 E A/T for the official use of the Embassy of Canada is exempt from VAT and ad valorem tax. (ITAD Ruling No. 038-01 dated April 5, 2001) IAETDc Very truly yours, (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service