Joson and Associates

September 25, 2009 BIR RULING [DA-(EXT-007) 567-09] Secs. 129 and 130; BIR Ruling 201-99; DA (EXT-003) 344-2009 Joson and Associates 41st Floor, Discovery Centre No. 25 ADB Avenue Ortigas Center, Pasig City Attention: Atty. Maricris C. Ang Gentlemen : This refers to your letter dated September 16, 2009 requesting, on behalf of your client, Petron Corporation ("Petron"), for confirmation of your opinion that the excise taxes paid by Petron for the importation of Jet A-1 fuel oil are refundable after the same was sold in its original state to international carriers as provided under Section 130 (D), in relation to Section 135, of the National Internal Revenue Code of 1997 (1997 Tax Code). It is represented that Petron is a resident corporation duly organized and existing under the laws of the Philippines engaged in the business of importing, refining and selling petroleum products; that from November 1, 2008 to December 31, 2008 and from February 1, 2009 to March 31, 2009, Petron imported 155,151,710 liters of Jet A-1 fuel oil; that excise taxes amounting to Php580,187,565.00 were paid for the importation and that out of the total volume of oil imported, 116,687,762 liters were actually sold to international carriers of Philippine and foreign registry for their use or consumption outside the Philippines. In support of your request, you submitted to this Office copies of the following documents, namely: Import Entries, Bills of Lading, Commercial Invoices, Certificate of Collection, Official Receipts and Authority to Release Imported Goods evidencing the payment of excise taxes before the Bureau of Customs. aIcDCT In reply, please be informed that Section 129 of the 1997 Tax Code, as amended, provides as follows: "SEC. 129. Goods Subject to Excise Taxes. Excise taxes apply to goods manufactured or produced in the Philippines for domestic sale or consumption or for any other disposition and to things imported. The excise tax imposed herein shall be in addition to the value-added tax imposed under Title IV. For purpose of this Title, excise taxes herein imposed and based on weight or volume capacity or any other physical unit of measurement shall be referred to as 'specific tax' and an excise tax herein imposed and based on selling price or other specified value of the good shall be referred to as ' ad valorem tax'." Thus, the importation of Jet A-1 fuel oil is subject to excise taxes pursuant to Section 129 cited above. However, since the imported fuel oil was sold to international carriers, the sale thereof shall not be subject to excise taxes as provided under Section 135 (a) of 1997 Tax Code, viz. : "SEC. 135. Petroleum Products Sold to International Carriers and Exempt Entities or Agencies. Petroleum products sold to the following are exempt from excise tax: (a) International carriers of Philippine or foreign registry on their use or consumption outside the Philippines: Provided, That the petroleum products sold to these international carriers shall be stored in a bonded storage tank and may be disposed of only in accordance with the rules and regulations to be prescribed by the Secretary of Finance, upon recommendation of the Commissioner;" SECcIH Moreover, as 75% of the imported Jet A-1 fuel oil was not introduced to the local market, the ruling of this Office enunciated in DA (EXT-003) 581-2008 dated December 24, 2008, citing therein BIR Ruling No. 201-99 dated December 16, 1999, applies. In the said ruling, this Office allowed the refund of excise taxes paid by the taxpayer on its importation of exciseable articles that were subsequently re-exported based on the theory of the law that the tax will not be due and payable until the exciseable articles are placed in the market for domestic consumption. Thus, considering that the imported Jet A-1 fuel oil was subsequently sold by Petron to international carriers for consumption outside the Philippine territorial jurisdiction, this Office is of the opinion that there is legal basis to refund the excise tax paid by Petron on the Jet A-1 fuel oil not introduced to the local market. This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be disclosed that the facts as represented are different, this ruling shall be considered null and void. Very truly yours, (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service