VAT Ruling No. 019-98

July 6, 1998 VAT RULING NO. 019-98 Sec. 103 (q)-057-88-019-98 International Center for Living Aquatic Resources Management, Inc. (ICLARM) Ground Floor, Bloomingdale Bldg. 205 Salcedo St., Legaspi Village Makati City Attention: Mr . James T . McMahon ADG, Corporate Services Gentlemen : This refers to your letter dated May 21, 1997 requesting for exemption from paying the VAT (input tax) passed on by your suppliers in your purchase of goods and services. In effect, you are claiming exemption from indirect taxes. It is represented that ICLARM is a private, international, non-stock, non-profit philanthropic, scientific research organization established in the Philippines in 1976; that it is one of the international research centers supported by the Consultative Group on International Agricultural Research, an informal association of national governments, international organizations and private institutions such as the World Bank, FAO and UNDP; that it is covered by a Host Country Agreement with the Philippine Government and that pursuant thereto, it enjoys certain immunities and privileges, including immunity from all forms of taxation; and that the said Agreement was ratified by the Senate of the Philippines under Resolution No. 62 adopted on October 7, 1996. In reply, I have the honor to inform you that based on the pertinent tax exemption provisions in the Headquarters Agreement between ICLARM and the Government of the Republic of the Philippines reading as follows: "ARTICLE IV "IMMUNITIES AND PRIVILEGES "C. Taxation and Customs 1. The provisions of existing laws or ordinances to the contrary notwithstanding, ICLARM, or its successors, shall be exempt from all taxes. This exemption shall extend to goods imported by ICLARM intended for its official use. 2. All gifts, bequests, donations and contributions which may be received by ICLARM from any source whatsoever, or which may be granted by ICLARM to any individual or non-profit organization for educational or scientific purposes, shall be exempt from the payment of the taxes. All gifts, contributions or donations to ICLARM shall be considered allowable deductions for purposes of determining the income tax of the donor." it is clear that your tax exemption privilege does not include exemption from indirect taxes, such as the value-added tax to which you are indirectly liable. Such being the case, your local purchases of goods as well as of services are subject to the value-added tax. However, your importations of articles necessary for your official activities are exempt from the value-added tax pursuant to Section 103(q) [now Section 109(q) of the 1997 Tax Code] of the National Internal Revenue Code, as amended (BIR Ruling No. 057-88 dated February 24, 1988). prcd Very truly yours, (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner Legal & Enforcement Group