Applicability of the Exemption from Withholding Tax Vis-á-Vis Revenue Regulations (RR) No. 8-2005 and Revenue Memorandum Order (RMO) No. 22-2005

May 2, 2002 ITAD RULING NO. 076-02 Sec 108 & 109 of the Tax Code 1997; Article 34, Vienna Convention BIR Ruling ITAD-35-00 Canadian Embassy Ninth Floor Allied Bank Center 6754 Ayala Avenue Makati City Gentlemen : This has reference to your letter dated April 17, 2002 referred to this Office by the Department of Foreign Affairs (DFA), requesting for a tax-free local purchase of a motor vehicle, one (1) Mitsubishi Pajero Spl. Ed. specifically described as follows: Type of use: Official Make: Mitsubishi Pajero Model year: 2002 Color: Aspen White Chassis Number: PAEV46WR22B002913 Engine Number: 4M40MAA5722 In reply, please be informed that pursuant to Article 34 of the Vienna Convention on Diplomatic Relations, pertinent portion of which 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 the goods and services; "xxx xxx xxx" the tax exemption privilege of an Embassy and its diplomatic agents does not include exemption from value added tax (VAT) and ad valorem taxes on its local purchases of goods and services. In other words, purchases by that Embassy of goods and/or services shall be subject to the value added tax prescribed under Sections 106 and 108, and ad valorem taxes under Section 149, both of the National Internal Revenue Code of 1997. However, applying the principle of reciprocity, this Office may grant VAT and ad valorem tax exemption to the Canadian Embassy or its personnel on their local purchases of goods and/of services it appearing from the list submitted by the Department of Foreign Affairs as of September 4, 2001 that your Government allows similar exemption to Philippine Embassy personnel on their purchase of goods and services in your country. Hence, the local purchase of one (1) Mitsubishi Pajero Spl. Ed., for the official use of the Canadian Embassy is exempt from VAT and ad valorem . (BIR Ruling No. ITAD-35-00 dated February 4, 2000) Very truly yours, (SGD.) MILAGROS V. REGALADO Assistant Commissioner Legal Service