VAT Ruling No. 001-97

January 17, 1997 VAT RULING NO. 001-97 Sec 103 (u)-206-93, 001-97 Embassy of the Federative Republic of Brazil RCI Bldg., Makati City Philippines Gentlemen : This refers to your letter dated July 20, 1996 requesting for exemption from the value-added tax (VAT) on your local purchases of goods and services in the Philippines. In reply, please be inform 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 the value-added tax (VAT) 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 100 (a) and 102 (a), both of the Tax Code, as amended by Executive Order. However, under the principle of reciprocity, this Office may grant tax exemption to the Embassy of Federative Republic of Brazil in Manila or its personnel on their local purchases of goods and/or services, provided that you can submit to the Commissioner of Internal Revenue or her duly authorized representative a copy of the special legislation or international agreement showing that the Government of the Federative Republic of Brazil allows similar tax exemption to the Philippine Embassy and its personnel on their purchases of goods and services in that territory (BIR Ruling No. 206-93 dated May 11, 1993). Records in the Bureau and the Department files revealed that Embassy of the Federative Republic of Brazil is among diplomatic missions in the Philippines exempt from tax (BIR Ruling No. 33-92 dated October 27, 1992). Such being the case, the Embassy of the Federative Republic of Brazil in the Philippines is exempt from VAT on their local purchases of goods and services in accordance with Section 103 (u) of the Tax Code. Very truly yours, ALICIA L. TOMACRUZ Head Revenue Executive Assistant/Director Legal Service Chairman, VAT Review Committee