BIR Ruling [UN-168-94]

May 30, 1994 BIR RULING [UN-168-94] Villaraza & Cruz 5th Floor, LTA Building 118 Perea Street, Legaspi Village Makati, Metro Manila Attention: Atty . Othelo C . Carag Gentlemen : This refers to your letter dated May 2, 1994 requesting confirmation of your opinion that your client, Pacific East Asia Cargo Airlines, Inc. (PEAC), a domestic air carrier engaged in international air commerce can claim exemption from excise tax on petroleum products consumed by its aircrafts in international flights pursuant to Section 132 of the Tax Code, as amended. It is represented that PEAC is a domestic corporation engaged in the business of a common and/or private carrier, i.e. the transportation by air of cargo, mail, merchandise, and freight of all kinds and nature, in the Philippines and abroad; that at present, PEAC's operations are limited to international air transportation of cargoes, mail and freight; that for this purpose, PEAC owns and/or leases several aircrafts which are used for its international flights; and that said aircrafts require and consume petroleum products which PEAC purchases from petroleum companies in the Philippines. In reply, please be informed that under Section 132 of the Tax Code, as amended, petroleum products sold to an international carrier for its use or consumption outside of the Philippines shall not be subject to excise taxes, provided, that the country of said carrier exempts from similar taxes petroleum products sold to Philippine carriers. Section 132 of the Tax Code, however, does not distinguish between an international carrier of domestic registry and an international carrier of foreign registry. Hence, a Philippine international carrier is exempt from paying the specific tax on petroleum products which it purchased for use in international operations. Moreover, to conclude otherwise would create a situation wherein domestic corporations would be discriminated in favor of foreign nationals for no apparent reason at all (BIR Unnumbered Ruling dated September 12, 1978). Accordingly, this office is of the opinion that PEAC is exempt from the excise tax on petroleum products purchased from petroleum companies in the Philippines and used by its aircrafts in international flights pursuant to Sections 132 of the Tax Code, as amended. (BIR Ruling No. 159-92 dated May 25, 1992). Very truly yours, ALICIA P. CLEMENO Acting Assistant Commissioner (Legal Service)