BIR Ruling [DA-247-00]

May 19, 2000 BIR RULING [DA-247-00] International Rice Research Institute Los Baos, Laguna Attention: Paulette Coburn Director for Administration and Human Resources Gentlemen : This refers to your letter dated November 23, 1998 which was referred to this Office by the Department of Finance on December 29, 1998, requesting exemption from the payment of specific taxes on your purchase of petroleum products from Petron Corporation. It is represented that you received a letter from Petron advising you that effective January 1, 1999, the latter will be constrained to sell its petroleum products inclusive of specific taxes because the Tax Reform Act of 1997 now provides that the specific tax on petroleum products has to be paid first prior to the removal of the products from the refinery; hence, you were constrained to ask the Department of Foreign Affairs to make representations with this Office to be able to purchase petroleum products from Petron free from specific taxes consistent with the provisions of Republic Act No. 2702 and Presidential Decree No. 1620. LibLex In reply, please be informed that the 1997 National Internal Revenue Code (NIRC), relative to the filing of return and payment of excise tax provides for the following: "SEC. 130. Filing of Return and Payment of Excise Tax on Domestic Products "(A) Persons Liable to File a Return, Filing of Return on Removal and Payment of Tax . "(1) . . . "(2) Time for Filing of Return and Payment of the Tax . Unless . . .: Provided, That excise tax on locally manufactured petroleum products and indigenous petroleum levied under Sections 148 and 151 (A)(4), respectively, of this Title shall be paid within ten (10) days from the date of removal of such products for the period from January 1, 1998 to June 30, 1998; within five (5) days from the date of removal of such products for the period from July 1, 1998 to December 31, 1998; and, before removal from the place of producing of such products from January 1, 1999 and thereafter. Provided, further . . . "(3) . . . "(4) . . ." Based on the foregoing provision, manufacturers of petroleum products are required, beginning January 1, 1999 and thereafter, to pay specific taxes due on these products even before these products are removed from the refinery and deposited in the depots. Since petroleum products deposited in the depots shall all be tax-paid beginning said date, this requirement effectively removed from the manufacturers the holding of tax-free petroleum products purchased by tax exempt entities. In view thereof, your supplier (Petron) of tax-free petroleum products has no other recourse but to pass on the specific taxes paid thereon to your company notwithstanding the fact that the same is a tax exempt entity: Under Section 1 of R.A. No. 2707, it is provided that "The provisions of existing laws or ordinances to the contrary notwithstanding, the International Rice Research Institute, or its successors, shall be exempt from the payment of gift, franchise, specific, percentage, real property, exchange, import, export, and all other taxes provided under existing laws or ordinances. This exemption shall extend to goods imported and owned by the International Rice Research Institute to be leased or used by members or its staff." Such being the case, IRRI is therefore covered by the exempting provision of Section 135(c) of the same Code, stating that petroleum products sold to " Entities which are by law exempt from direct and indirect taxes " are exempt from excise tax. Thus, it is entitled to a refund of specific taxes in cases where its purchases of petroleum products, beginning January 1, 1999, are made inclusive of taxes. The administrative remedy provided by the Code in this particular case is for you to file with the Bureau a claim for tax refund/tax credit certificate corresponding to said taxes pursuant to Section 229 thereof, which claim must be filed within two (2) years from the date of payment of said tax. (BIR Ruling No. 23-99 dated February 25, 1999) This ruling is issued based on the foregoing facts as represented. However, if it shall be found that the facts are different, then this ruling shall be considered null and void. Very truly yours, Commissioner of Internal Revenue By: (SGD.) MILAGROS V. REGALADO Acting Assistant Commissioner (Legal Service)