VAT Ruling No. 005-97

January 17, 1997 VAT RULING NO. 005-97 Sec. 103 (u); 206-93; 005-97 Embassy of the Federal Republic of Nigeria Manila, Philippines Gentlemen : This refers to your Note No. NE/05/07/96 dated July 5, 1996 which was referred to this Office by the Department of Foreign Affairs relative to the issuance of the Tax Exemption Certificate and the Nigerian Government's grant of VAT exemption to foreign diplomatic missions and their personnel in Nigeria. 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 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 Nigerian Embassy in Manila or its personnel on construction services rendered as well as other Value-Added and other taxes 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 Nigeria 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). Per your said Note dated July 5, 1996 addressed to the Department of Foreign Affairs, Manila, construction services rendered on foreign embassies in Nigeria are exempt from VAT; and that exemption from Value-added and other taxes are accorded to diplomatic missions and personnel in Nigeria. Such being the case, the Embassy of Nigeria in the Philippines is exempt from VAT on similar transactions. Very truly yours, ALICIA L. TOMACRUZ Head Revenue Executive Assistant/Director Legal Service Chairman, VAT Review Committee