VAT Ruling No. 084-89

April 4, 1989 VAT RULING NO. 084-89 Carpetmasters Phils., Inc. 2nd Flr., Showrooms Bldg., Makati Commercial Center Makati, M.M. Attention: Mr . Jerry M . Hervas President & General Manager S i r s : This refers to your letter dated Oct. 24, 1988, seeking clarification as to the applicability of the value-added tax (VAT) to your transactions with foreign embassies/consulates and the US Military Bases. cdll In reply, please be informed of the following: 1. Local purchases and importations made by foreign embassies in their official capacity are exempt from the value-added tax pursuant to Sec. 103 (u) of the Tax Code, as amended by E.O. No. 273. This is further supported by the principle of comity of nations, and in view of the certification by the Department of Foreign Affairs that the Philippine Embassy enjoys exemption from indirect tax in certain countries. 2. Your sale of services to the agencies of the United Nations is effectively zero-rated provided that the agency charter provides that the exemption granted to the specialized agency is also extended to its suppliers of goods and services. 3. In accordance with Article XVIII of the RP-US Military Bases Agreement (as supported by the Exchange of Notes Constituting an agreement between the Republic of the Philippines and the United States implementing the agreements of March 14, 1947, concerning military bases), the sale of goods and services to Subic, Clark or any military base which is exempt from sales taxes is effectively zero-rated because the grantee's exemption privilege is extended to its suppliers of goods and services. [Section 8(c) of Revenue Regulations 5-87 implementing Section 100(a)(2) of the Tax Code, as amended]. Finally, if the sale to any the abovecited agencies or bodies is made by a VAT-registered entity, the local purchase shall be effectively zero-rated provided that an application filed by the seller has been approved by BIR. cdti Very truly yours, EUFRACIO D. SANTOS Deputy Commissioner