RMC No. 31-2006: Prescribes the guidelines for the grant of VAT exemption on the purchase of goods and services associated with the construction or renovation of the diplomatic properties of the Embassy of the United States of America in the Philippines

Key points

1. Recognition of the Construction Agent. The BIR recognizes the private American firm chosen by the USA Department of State as Construction Agent upon receipt of a Note Verbale from the U.S. Embassy, indorsed by the DFA. The note comes with the agency contract and a Special Power of Attorney naming the project and the extent of the agent’s purchasing authority.
2. Subcontractors and vendors. The BIR recognizes subcontractors and vendors only on notification by the U.S. Embassy through a Note Verbale, favorably indorsed by the DFA, before the project begins. Additional names follow the same procedure.
3. VAT treatment of sales. The Construction Agent may buy locally on behalf of the Embassy and use the VAT Exemption Certificate issued to the Embassy. Sales to the agent for the covered projects are zero-rated under RR No. 16-2005, and the Circular serves as the prior approval of zero-rating that RR No. 16-2005 requires.
4. Invoice requirements. Suppliers issue a VAT invoice or receipt for each sale showing the seller’s VAT registration and TIN, the agent’s name and address with the words for the account of the U.S. Embassy in the Philippines, the Embassy’s VAT Exemption Certificate Number, the total amount and separate tax, and the words ZERO RATED SALE. Non-VAT suppliers issue a non-VAT invoice or receipt, and the Percentage Tax forms part of the cost of the sale.
5. Validation and assistance. An Embassy representative validates the invoices, and photocopies of approved invoices go to RDO No. 50, Pasay City on a monthly or quarterly basis. If a vendor does not honor the exemption, the Chief of the ITAD assists and issues a certification signed by the Assistant Commissioner of the Legal Service.
6. Imports and amended issuances. Imported construction materials are consigned to the U.S. Embassy and not to the Construction Agent. Provisions of Revenue Memorandum Order No. 22-2004 and other issuances that are inconsistent with the Circular are revised, but only as they apply to its subject matter.

Who is affected

• U.S. Embassy in the Philippines and its Construction Agent
• Subcontractors and vendors notified by the Embassy
• Suppliers of goods and services for the projects