ITAD Ruling No. 180-03

November 25, 2003 ITAD RULING NO. 180-03 Sec 109 (q) of the Tax Code of 1997 BIR Ruling No. DA-ITAD-91-03 Deutsche Gesselschaft Fur Technische Zusammenarbeit (GTZ) c/o GDC-GTZ Office, 9/F, PDCP Bank Center LP Leviste cor. V.A. Rufino Sts., Salcedo Village Makati City Attention: Andreas Kanzler Project Manager Advisory Services for Water Management in Selected Regions Gentlemen : This has reference to your letter dated June 17, 2002 which was endorsed to this Bureau by the Department of Foreign Affairs (DFA), requesting for exemption from payment of value-added tax (VAT) on the local purchase of one (1) Toyota Revo VX 200 for the personal use of Mr. Andreas Kanzler, Project Manager for the Advisory Services for Water Management in Selected Regions, a project under the DEUTSCHE GESSELSCHAFT FUR TECHNISCHE ZUSAMMENARBEIT (GDC-GTZ) of the German Embassy. In support of your request, you have submitted a copy of the Agreement between the Government of the Republic of the Philippines and the Government of the Federal Republic of Germany concerning Technical Cooperation dated September 7, 1971, pertinent portion of which provides that the Government of the Philippines shall "(3) exempt the German experts, teachers and technicians, their families and other members of their households, for the duration of their stay, from all import and export duties and other fiscal charges in respect of effects intended for their personal use, provided that such articles shall be re-exported; such effects shall include, for each household, one motor vehicle, one refrigerator, one deep freezer, one radio, one record player, one tape recorder, one television set, minor electrical appliances and, for each person, one air-conditioner, one set of photographic and cine equipment. (Emphasis supplied) In reply, please be informed that Section 109 of the National Internal Revenue Code of 1997 (NIRC) provides, viz : CTaSEI "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; "xxx xxx xxx" Under the aforecited provisions, a transaction is exempt from VAT when an international agreement to which the Philippines is a signatory or a special law provides for such exemption. It is worthy to note that Article 5(3) of the submitted Agreement between the Government of the Republic of the Philippines and the Government of the Federal Republic of Germany concerning Technical Cooperation clearly provides exemption from import and export duties and other fiscal charges of personal effects of German experts imported into the country provided these shall be re-exported, and does not contemplate exemption from VAT of locally purchased personal effects including but not limited to motor vehicle. In view thereof, your herein request for exemption from VAT on the local purchase of one (1) unit of Toyota Revo VX 200, for the personal use of Mr. Andreas Kanzler is hereby denied for lack of legal basis. Very truly yours, (SGD.) MILAGROS V. REGALADO Assistant Commissioner Legal Service