Tax Exemption Privileges Granted under the RP-US Military Bases Agreement in Purchasing Petroleum Products

August 23, 1988 BIR RULING NO. 407-88 127-00 000-00 407-88 Gentlemen : This refers to your letter dated July 13, 1988 requesting a ruling whether the grant by the U.S. Government to the Philippine Government in the amount of $2,488,000.00 to be given in the form of petroleum products, for the purpose of assisting the Philippine Government in its military defense/activities is subject to tax. It appears that you have been informed by the Contracting Officer of the U.S. Naval Supply Depot (NSD), U.S. Navy, Subic Bay, of the above grant by the U.S. Government, thru its Defense Department (JUSMAG), but instead of cash, petroleum products in the equivalent quantity/amount shall be given; that the U.S. Defense Department would like to course delivery of the products, thru the Armed Forces of the Philippines at delivery points to be designated by the U.S. Defense Department; that in implementing its grant, the U.S. Defense Department would like to purchase the petroleum products from the Petron Corporation and that it would avail and use its tax exemption privileges granted under the RP-US Military Bases Agreement in purchasing the petroleum products. In reply, please be informed that your request is answered in the affirmative. Article V of the RP-US Military Bases Agreement provides that no tax shall be charged on material, equipment, supplies or goods "for exclusive use in the construction, maintenance, operation or defense of the bases, consigned to, or destined for the United States authorities and certified by them to be for such purpose." In the instant case, the petroleum products to be purchased by the U.S. Defense Department are not for the exclusive use of the U.S. bases since they shall be used by the Philippine Government, thru its Armed Forces, in its military defense/activities. Accordingly, the tax exemption privilege under the RP-US Military Bases Agreement cannot be applied in the aforesaid purchase of petroleum products. Very truly yours, (SGD.) BIENVENIDO A. TAN, JR. Commissioner