Who may Claim Tax Credit/Refund of the Excise Tax on Petroleum Products Sold to International Carriers

September 17, 1991 BIR RULING NO. 190-91 132-00 000-88 190-91 Gentlemen : This refers to your letter dated October 9, 1990, requesting confirmation of your opinion to the effect that Petron Corporation (Petron) is entitled to a tax credit/refund to the excise taxes it originally paid on petroleum products sold and delivered to Mobil (Phils.) Inc. (Mobil) for which Mobil paid Petron net of excise tax with Mobil later on selling and delivering said petroleum products exclusive also of the excise tax to international carriers pursuant to Section 132 of the Tax Code. It appears that in a letter dated August 8, 1988, this Office granted Petron a permit to deliver petroleum products to Mobil and to foreign international carriers, Philippine Airlines, foreign international marine carriers, and international marine carriers registered in the Philippines, intended for their international consumption pursuant to Section 132 of the Tax Code. Said permit is subject to the conditions, among others, that the petroleum products shall be sold by Petron to international carriers registered in countries which exempt from tax petroleum products sold to Philippine carriers; that the petroleum product sold by Petron to the aforementioned international carriers be used for international flights; that no excise taxes shall be paid on said products provided that the same are physically delivered into the aircraft within fifteen (15) days after date of refinery withdrawals; that petroleum products already withdrawn from the refinery and which are not yet physically delivered into the aircraft within fifteen (15) days after date of refinery withdrawal, shall be subject to the payment of excise tax not later than the fifteenth day after date of refinery withdrawal, otherwise surcharges and penalties provided under the National Internal Revenue Code shall apply; that excise tax paid on petroleum products sold and physically delivered to the aforementioned aircraft beyond fifteen (15) days after date of refinery withdrawal shall be recovered by Petron by filing claims for tax credit/refund with the Field Operations Division. In reply, please be informed that under Section 132 of the Tax Code, petroleum products sold to international carriers for its use or consumption outside of the Philippines shall not be subject to excise taxes, Provided: That the country of said carriers exempts from similar taxes petroleum products sold to Philippine carriers. This provisions however limits the creditability and/or refundability of the excise tax only on the petroleum products shall actually sold by the manufacturer/producer thereof. In other words, in order to be exempt under Section 132 of the Tax Code, the sale of the petroleum products should be direct from Petron to the International carrier. This is so because excise tax on petroleum products is the direct liability of the manufacturer/producer and when added to the cost of the goods sold to the buyer it is no longer a tax but part of the price which the buyer has to pay to obtain the article. (Philippine Acetylene vs. CIR, 20 SCRA 1056) Accordingly, since in the case of your sale to Mobil of said petroleum product, you did not directly sell the same to the international carriers, you are not the party entitled to claim the tax credit/refund of the excise tax. On the other hand, since Mobil, which directly sold the product to the international carrier is not the manufacturer/producer, it is not the party liable for the excise tax; hence, it has, likewise no personality to claim the tax credit/refund of the corresponding excise tax paid by you. (BIR Ruling dated June 7, 1989) cdtech Very truly yours, (SGD.) JOSE U. ONG Commissioner By: (SGD.) EUFRACIO D. SANTOS Deputy Commissioner Officer-in-Charge