VAT Ruling No. 009-97

January 17, 1997 VAT RULING NO. 009-97 Sec. 103 (u); 206-93; 009-97 Embassy of the United States of America Manila, Philippines Gentlemen : This refers to your letter dated June 21, 1996 certifying to the fact that the United States of America does not impose Value-Added Tax as a tax-type on goods and services, including leases of residential properties, purchased for the official use of the Philippine embassy or its personnel in Washington based on the provisions on reciprocity of the Vienna Convention on Diplomatic Relations. cdll 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 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 a Foreign State and its personnel on their local purchases of goods and services, provided that they can submit to the Commissioner of Internal Revenue or her duly authorized representative a copy of the special legislation or an international agreement showing that said foreign government allows similar tax exemption to the Philippine Embassy and its personnel on their purchases of goods and services in that foreign country (BIR Ruling No. 206-93 dated May 11, 1993). Such being the case, and inasmuch as your Government allows such tax exemption privileges to Philippine Embassy or its personnel on their purchases of goods and services in your territory, this Office, under the principle of reciprocity, hereby grants similar tax exemption to the Embassy of the United States of America and its missions and diplomatic staff on their purchases of goods and/or rental services in the Philippines (BIR Ruling No. 33-92 dated October 27, 1992). Very truly yours, ALICIA L. TOMACRUZ Head Revenue Executive Assistant/Director Legal Service Chairman, VAT Review Committee