Whether Exportation of Indigenous Petroleum (crude oil) Lifted from Off-shore Oil Wells Elsewhere in the Province of Palawan is Subject to Excise Tax

January 25, 1991 BIR RULING NO. 009-91 151 (a) (4) 000-00 009-91 Gentlemen : This refers to your letter dated April 16, 1990 in relation to your earlier letters dated February 15, 1990 and March 19, 1990, in effect, requesting confirmation of your opinion that your exportation of indigenous petroleum (crude oil) lifted from your off-shore oil wells elsewhere in the province of Palawan is not subject to excise tax. In reply, please be informed that pursuant to Sections 126 and 1327 of the Tax Code, 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; and unless otherwise especially allowed, the excise tax on domestic products shall be paid by the manufacturer or producer before removal from the place of production. Section 151 (a) (4) of the Tax Code specifically provides that the first taxable sale of the indigenous petroleum (crude oil) shall be subject to the ad valorem tax of 10% as inserted by Executive Order No. 312 effective December 16, 1987 (formerly 15% under Executive Order No. 311 effective December 10, 1987); and that the tax shall be paid by the buyer or purchaser within fifteen (15) days from the date of actual or constructive delivery to the said buyer or purchaser. The phrase "first taxable sale, barter, exchange or similar transaction" means the transfer of indigenous petroleum in its original state to the first taxable transferee . Based on the foregoing, it can be clearly inferred that since excise tax applies only to domestic sale, and that for indigenous petroleum (crude oil) the person liable is not the producer thereof but the transferee in the first taxable sale, your exportation thereof is not subject to excise tax under Section 151 (a).(4) of the Tax Code. Pursuant to Section 103 (e) of the Tax Code, you are not also liable to the 10% VAT because indigenous petroleum is a raw material in the manufacture of petroleum products. This serves as your authority to export indigenous petroleum lifted from your off-shore oil wells in Palawan without the payment of the excise and/or value-added tax. cdta Very truly yours, (SGD.) JOSE U. ONG Commissioner