ITAD Ruling No. 169-00

October 30, 2000 ITAD RULING NO. 169-00 NIRC Sec. 173 Vienna Convention 91-97 77-95 Embassy of the Republic of Singapore 6th Floor ODC International Plaza Building 219 Salcedo Street, Legaspi Village 1229 Makati City Attention: Ms . Angeline Thangaperakasam Third Secretary Gentlemen : This refers to your Note No. MNL/LTR/036/2000 dated February 21, 2000 requesting clarification as to whether the Embassy of the Republic of Singapore is liable from paying the following: 1) Capital Gains Tax 2) Documentary Stamp Tax 3) Transfer Tax (Local Government Tax) 4) Real Estate Tax; and 5) Registration Fee It is represented that in 1981, the Embassy of the Republic of Singapore purchased from Lebran Realty Properties two (2) units (14A and 7B) of their condominium project, LPL Mansions; that it was only last year when you realized that you are not yet in possession of the title deed for unit 14A; and that you got in touch with the Municipal Council of Makati City and were informed that the reason the Embassy of the Republic of Singapore has not been issued the title deed was that the above taxes with respect to the transfer of ownership of the property has not been paid. In reply, please be informed that pursuant to Article 23 of the Vienna Convention On Diplomatic Relations adopted on April 18, 1961 (Vol. IV, 445-460, Phil. Tax Treaty Series) pertinent portion of which reads: "ARTICLE 23 "1. The sending state and the head of mission shall be exempt from all national, regional or municipal dues and taxes in respect of the premises of the mission, whether owned or leased, other than such as represent payment for specific services rendered. "2. The exemption from taxation referred to in this article shall not apply to such dues and taxes payable under the law of the receiving state by the person contracting with the sending state or the head of the mission." cEAHSC It is clear from the aforequoted provision of the Convention that the Embassy of the Republic of Singapore is exempt from payment of internal revenue taxes for which it is directly liable, i.e.. capital gains and documentary stamp taxes. (BIR Ruling No. 91-97 dated March 7, 1997). However, the seller (Lebran Realty Properties) and not you, the buyer (Embassy of the Republic of Singapore), is the party liable for the capital gains tax on the gain derived by it from the sale to you of its property pursuant to Section 2 of the Revenue Regulations No. 13-85. Finally, Section 173 of the Tax Code of 1997, provides, among others, that whenever one party to the taxable document enjoys exemption from the tax therein imposed, the other party thereto who is not exempt shall be the one directly liable to the tax, hence, Lebran Realty Properties (seller) shall be the party directly liable for the payment of documentary stamp tax considering that the Embassy (buyer) is tax-exempt. (BIR Ruling No 7,-95 dated April 24, 1995) It is not within the jurisdiction of this Office to rule on the exemption of the Embassy with respect to transfer tax (local government tax), real estate tax and registration fee. You may address your query to the Department of the Interior and Local Government-Finance, which has the jurisdiction on the said matter. Very truly yours, Commissioner of Internal Revenue By: (SGD.) LILIAN B. HEFTI Deputy Commissioner Legal and Inspection Group