ITAD Ruling No. 164-03

November 7, 2003 ITAD RULING NO. 164-03 Section 109 (q), NIRC Article VI, Section 9 of the Articles of Agreement of the International Finance Corporation VAT Ruling No. 109-99 International Finance Corporation 11th floor, Tower One, Ayala Triangle Ayala Avenue, Makati City Attention: Mr. Vipul Bhagat Country Manager International Finance Corporation Gentlemen : This has reference to your letter dated May 8, 2003 referred to this Office by the Department of Finance (DOF) and the Department of Foreign Affairs (DFA), requesting for a tax-free local purchase of one (1) motor vehicle, for the official use of the International Finance Corporation, specifically described as follows: Type of use: Official use Organization: International Finance Corporation Make: Nissan Serena Limited Edition Model year: 2003 Color: Lunar Sil Engine No: C24B0A000833 Frame No: SR20-004546 It is represented that the International Finance Corporation is a member of the World Bank Group; that it is a fully accredited diplomatic organization with the Department of Foreign Affairs; that it is also a specialized agency of the United Nations; and that it is immune from taxation in accordance with Section 9(a), Article VI of the Articles of Agreement of the International Finance Corporation. HIEAcC In reply, please be informed that BIR Ruling No. 008-98 dated January 29, 1998, provides viz : "While the specialized agencies 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 specialized agencies are making important purchases for official use of property on which such duties and taxes have been charged or chargeable, States parties to this Convention will, whenever possible, make appropriate administrative arrangements for the remission or return of the duty or tax. "It is represented further that Philippine national interest would be served by a provision of administrative arrangements for a remission or a return of the VAT in favor of the UN and its related offices in Manila and invoking the above-quoted provision of an international agreement, you are recommending a special and effective administrative arrangements in favor of the UN and its related organizations operating in Manila through the grant of VAT exemption." In connection thereto, please be informed that Section 109(q) of the National Internal Revenue Code of 1997 (NIRC), provides that: "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, are exempt from the value-added tax." Such being the case and since the Philippines is a member of the United Nations and is a signatory to the Convention on the Privileges and Immunities of the Specialized Agencies of the United Nations adopted by the General Assembly on November 21, 1947, the United Nations and its related organizations operating in the Philippines shall be exempt from the VAT on their importations and purchases of important movable and immovable properties for official use. In view thereof and with the favorable recommendation of the DFA and the DOF on the matter, this Office is of the opinion and so holds that the local purchase of one (1) unit of Nissan Serena Limited Edition, Model 2003 for the official use of the International Finance Corporation shall be exempt from VAT imposed under Section 106(A) of the NIRC. (VAT Ruling No. 109-99 dated November 22, 1999) acHITE Very truly yours, (SGD.) MILAGROS V. REGALADO Assistant Commissioner Legal Service