Exemption of Air Phil. from Taxes on Importation of VAT-Exempt Petroleum Products for Domestic Operations

October 23, 2000 BIR RULING NO. 048-00 Air Philippines Corporation R-3 Hangar, PAL Gate 2 Andrews Avenue, Pasay City Attention: Capt . Rogelio M . Narciso EVP-Chief Operating Officer Gentlemen : This refers to your letter dated August 7, 2000 seeking confirmation that Air Philippines Corporation (APC) is exempt from taxes imposed by the National Internal Revenue Code on all importations or purchases from abroad of petroleum products which are exempt from value-added tax for use in domestic operations, pursuant to the letter-decision dated June 28, 2000 of the Secretary of Finance, revoking BIR Ruling No. 013-2000 and restoring BIR Ruling No. 110-99 which likewise cited BIR Ruling No. 013-99. It appears from the records that on July 20, 1999, BIR Ruling No. 110-99 was issued to the effect that the petroleum products imported or purchased from abroad by Cebu Air Inc. (CAI) for use in its domestic operations are exempt from all taxes imposed under the National Internal Revenue Code, pursuant to Section 11, R.A. No. 7151 (CAI-Franchise) in relation to Sec. 13 of PD No. 1590 (Philippine Airlines (PAL) franchise) and LOI No. 1483; that in a letter dated May 1999, APC requested for a confirmatory ruling that it is entitled to the same tax exemption privileges, invoking the ipso facto clause of its legislative franchise (Sec. 15, R.A. No. 8399), the tenor of which is similar to that of CAI's; that on January 7, 2000, BIR Ruling No. 013-2000 was issued revoking BIR Ruling No. 110-99 on the ground that the franchise of CAI does not expressly provide for an exemption and that moreover, the ipso facto clause therein applies prospectively and does not refer to PAL; that simultaneously, on January 7, 2000, BIR Ruling No. 015-200 was issued denying APC's request for tax exemption benefits on the same ground; that while APC did not contest BIR Ruling No. 015-2000, CAI filed with the Secretary of Finance a request for consideration of BIR Ruling No. 013-2000; and that on June 28, 2000, the Secretary of Finance issued a letter-decision resolving CAI's request for a consideration, the dispositive portion of which states: "On the basis of the foregoing, BIR Ruling No. 013-2000 is hereby revoked. BIR Ruling No. 110-99, which provides for CAI's exemption from all taxes imposed by the NIRC on its importation or purchases of petroleum products from abroad for use in its domestic operations, is hereby reinstated. " In the interest of a level playing field, this ruling shall also apply to other airlines similarly situated ." On the basis of the letter-decision, it is now your contention that APC is likewise exempt from all taxes imposed by the NIRC on its importations or purchases from abroad of petroleum products which are exempt from value-added tax for use in its domestic operations. ITHADC In reply, please be informed that pursuant to the provisions of Sec. 15 of R.A. 8399 (APC's franchise), in relation to Section 13 of P.D. No. 1590 (Franchise of PAL) and the letter-decision dated June 28, 2000 of the Secretary of Finance, pertinent portions of which are heretofore quoted, APC shall be exempt from all taxes imposed by the Tax Code on its importation and purchases from abroad of petroleum products which are exempt from value-added tax under Section 109(e) of the Tax Code of 1997, which importations shall be used for its domestic operations. Very truly yours, (SGD.) DAKILA B. FONACIER Commissioner of Internal Revenue