VAT Ruling No. 109-99

November 22, 1999 VAT RULING NO. 109-99 Sec. 109 (q)-008-98-109-99 International Finance Corporation (IFC) 11th Floor Stock Exchange Center Ayala Avenue, Makati City Attention: Ms . Stella Manalansan Gentlemen : This refers to your letter dated October 7, 1999 concerning your request for a confirmation that your supplier of goods and services are entitled to the benefit of the zero percent (0%) value-added tax (VAT). It is represented that the IFC is the private sector arm of the World Bank Group; that it is also a specialized agency of the United Nations; that, it is immune from taxation in accordance with Sec. 9, ARTICLE VI of the Articles of Agreement of the International Finance Corporation; that. the same is an international agreement in which the Philippines is a signatory; that, in the BIR Ruling No. 165-89, dated August 8, 1989, it was held that the IFC is exempt from "indirect taxes" in respect of its purchases of goods and services. In reply, please be informed that in BIR VAT Ruling No. 008-98, dated January 29, 1998, it was held: " While the specialized agencies will not as a general rule claim exemption from excise duties and from taxes on the sale of movable and immovable property which form part of the price to be paid nevertheless when the specialized agencies are making important purchases for official use of property on which such duties and taxes have been charged or chargeable, States parties to this Convention will, whenever possible, make appropriate administrative arrangements for the remission or return of the duty or tax . " It is represented further that Philippine national interest would be served by a provision of administrative arrangements for a remission or a return of the VAT in favor of the UN and its related offices in Manila and invoking the above-quoted provision of an international agreement, you are recommending a special and effective administrative arrangements in favor of the UN and its related organizations operating in Manila through the grant of VAT exemption . " In reply, please be informed that under Section 103(q) of the Tax Code, as amended, "Transactions which are exempt under international agreements to which the Philippines is a signatory or under special laws, except those, under Presidential Decree Nos. 66, 529 and 1590, are exempt from the value-added tax." Such being the case and since the Philippines is a member of the United Nations and a signatory to the Convention on the Privileges and Immunities of the Specialized Agencies of the United Nations adopted by the General Assembly on 21 November 1947, the United Nations and its related organizations operating in the Philippines shall be exempt from the VAT on their importations and purchases of important movable and immovable properties for official use ." In view thereof, your supplier of the aforementioned goods cannot qualify to 0% VAT. However, it shall be exempt from the 10% VAT pursuant to the aforementioned provisions of Sec. 109 (q) of the National Internal Revenue Code of 1997 (formerly Sec. 103 (q), old NIRC). Very truly yours, Commissioner of Internal Revenue By: (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner Legal and Enforcement Group