BIR Ruling [DA-415-99]

July 19, 1999 BIR RULING [DA-415-99] Embassy of the United States of America Roxas Boulevard, Manila Gentlemen : This refers to your Note No. 98-1142 which was referred to this Office by the Director for Privileges and Immunities, Department of Foreign Affairs, in effect requesting exemption from the payment of specific taxes on your purchase of petroleum products. It is represented that you have been advised by companies supplying petroleum products for the official use of that Embassy that specific tax will form part of the purchase effective January 1999; hence, your request for favorable recommendation by the Department of Foreign Affairs in order that your request for tax exemption may be granted based on the principle of reciprocity. 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 the 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 production 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 Embassy notwithstanding the fact that the same is a tax exempt entity. In an unnumbered ruling (UN-019-1-15-96), this Office granted the request for tax exemption of the Embassy of the United States of America and its personnel on their local purchases of goods under the principle of reciprocity, it appearing that the US Government allows similar exemption to the Philippine Embassy personnel on their purchase of goods and services in that territory. cDECIA Such being the case, the Embassy of the United States of America 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 that Embassy 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 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.) SIXTO S. ESQUIVIAS IV Deputy Commissioner (Legal & Enforcement Group)