Reiterating the Guidelines Governing the Powers of LGUs to Impose Taxes, Fees and Charges on Petroleum Products and New Entrants in the Oil Industry Pursuant to Republic Act No. 7160

September 26, 2016 BLGF MEMORANDUM CIRCULAR NO. 024-16 TO : All BLGF Regional Directors; All Provincial, City and Municipal Assessors and Treasurers; and Others Concerned SUBJECT : Reiterating the Guidelines Governing the Powers of LGUs to Impose Taxes, Fees and Charges on Petroleum Products and New Entrants in the Oil Industry Pursuant to Republic Act No. 7160 This Memorandum Circular is issued to reiterate the guidelines governing the limitation on the power of provinces, cities and municipalities to impose taxes, fees and charges on petroleum products and new entrants in the oil industry, as provided for under Section 133 (h) of Republic Act No. 7160, otherwise known as the Local Government Code of 1991, and in relation with Section 143 (c-3) thereof. Despite the issuance of the Local Finance Circular (LFC) No. 1-05 dated 08 December 2005 by the Department of Finance, complaints on LGUs that do not comply with said guidelines still continue. While the efforts of LGUs to increase their revenues are laudable, such should be done in accordance with law, rules and regulations. In view hereof, all parties concerned are hereby enjoined to strictly observe the provisions of LFC No. 1-05 (copy enclosed), pertinent portions of which are quoted: "xxx xxx xxx Section 3. Exemption from Local Taxation. (a) Pursuant to Section 133 (h) of the LGC and Article 232(h) of the IRR, local government units are prohibited from imposing taxes, fees and charges on petroleum products, which include the sale of petroleum products by gasoline stations, dealers resellers or retailers. However, the sale of tires, batteries and other accessories (TBA) as well as services rendered by them are subject to business taxes. xxx xxx xxx Section 4. Exemption from Real Property Tax for New Participants in Downstream Oil Industry. Consistent with Section 9 (7) of Republic Act No. 8479, production equipment or machineries, which are actually, directly, and exclusively used to meet the needs of refining, storage, marketing and distribution of BOI-Registered oil industry participants are exempted from the payments of real property tax. Said incentives may be availed of by persons with new investment for a period of (5) years from the date of registration with the BOI. DETACa xxx xxx xxx." Please be guided accordingly. (SGD.) NIO RAYMOND B. ALVINA OIC Executive Director ATTACHMENT LOCAL FINANCE CIRCULAR NO. 1-05 December 8, 2005 SUBJECT : PRESCRIBING THE GUIDELINES GOVERNING THE POWERS OF LOCAL GOVERNMENT UNITS TO IMPOSE TAXES, FEES AND CHARGES ON PETROLEUM PRODUCTS AND NEW ENTRANTS IN THE OIL INDUSTRY PURSUANT TO REPUBLIC ACT NO. 7160, OTHERWISE KNOWN AS THE LOCAL GOVERNMENT CODE (LGC) OF 1991 TO : ALL REGIONAL DIRECTORS, BUREAU OF LOCAL GOVERNMENT FINANCE, TREASURERS OF METROPOLITAN MANILA; PROVINCIAL, CITY AND MUNICIPAL TREASURERS, AND OTHERS CONCERNED In view of Section 133 (h) of Republic Act No. 7160, otherwise known as the "Local Government Code (LGC) of 1991," providing that the exercise of the taxing powers of Local Government Units (LGUs) shall not extend to the levy of local taxes, fees and charges on petroleum products and in accordance with Article 287 of its Implementing Rules and Regulations (IRR), the following guidelines are hereby prescribed to clarify the implementation of the said provision consistent with the pertinent provisions of Republic Act No. 8479, otherwise known as "An Act Deregulating the Downstream Oil Industry," granting incentives to the downstream oil industry, Executive Order No. 226, otherwise known as the "Omnibus Investment Code of 1987" and other related laws and national policies. Section 1. Coverage. This Circular prescribes the guidelines governing the limitation on the powers of provinces, cities and municipalities to impose taxes, fees and charges on petroleum products as provided for under Section 133 (h) of the LGC in relation with Section 143 (c-3) thereof. Section 2. Definition of Terms. As used herein the following terms shall mean: (a) "Petroleum Products" shall refer to products formed in the course of refining crude petroleum through distillation, cracking, solvent refining and chemical treatment coming out as primary stocks from the refinery such as, but not limited to LPG, naptha, gasoline, solvent, kerosene, aviation fuels, diesel oils, fuel oils, waxes and petroleum fractions which have not undergone any process or treatment as to produce separate chemically-defined compounds in a pure or commercially pure state and to which various substances may have been added to render them suitable for particular uses; Provided, That the resultant product contains not less than fifty percent (50%) by weight of such petroleum products; (b) "New Industry Participants" shall refer to new participants in a particular sub-sector of the downstream oil industry with investments and initial business operations commencing after January 1, 1994; (c) "Dealer" shall refer to any person, whether natural or juridical, who is engaged in the marketing and direct selling or petroleum products to motorists, end users, and other consumers; (d) "Hauler" shall refer to any person, whether natural or juridical engaged in the transport, distribution, hauling, and carriage of petroleum products, whether in bulk or packed form, from the oil companies and independent marketers to the petroleum dealers and other consumers; (e) "Downstream Oil Industry" or "Industry" shall refer to the business of importing, exporting, re-exporting, shipping, transporting, processing, refining, storing, distributing, marketing and/or selling crude oil, gasoline, diesel, liquefied petroleum gas, kerosene, and other petroleum products; (f) "Machinery" embraces machines, equipment, mechanical contrivances, instruments, appliances or apparatus which may or may not be attached, permanently or temporarily to the real property. It includes the physical facilities for production, the installation and appurtenant service facilities, those which are mobile, self-powered or self-propelled, and those not permanently attached to the real property which are actually, directly and exclusively used to meet the needs of the downstream oil industry, business or activity; (g) "'Retailers fees" refer to payments made by gasoline operator to oil companies directly for the sale of petroleum products. Section 3. Exemption from Local Taxation. (a) Pursuant to Section 133 (h) of the LGC and Article 22 (h) of the IRR, local government units are prohibited from imposing taxes, fees and charges on petroleum products, which include the sale of petroleum products by gasoline stations, dealers, resellers or retailers. However, the sale of tires, batteries and other accessories (TBA) as well as services rendered by them are subject to business taxes. (b) Haulers of petroleum products who operate as transportation contractors or independent common carriers shall be exempt from local taxes pursuant to Section 133 (j) of the LGC. (c) Taxes, fees, charges and other impositions shall not be levied on petroleum products carried into or out of or passing through the territorial jurisdictions of local government units pursuant to Section 133 (e) of the Code. Section 4. Exemption from Real Property Tax for New Participants in the Downstream Oil Industry. Consistent with Section 9 (7) of Republic Act No. 8479, production equipment or machineries, which are actually, directly, and exclusively used to meet the needs of refining, storage, marketing and distribution of BOI-registered oil industry participants are exempted from the payment of real property tax. Said incentive may be availed of by persons with new investments for a period of five (5) years from the date of registration with the BOI. aDSIHc Section 5. Mayor's Permit Fee and Other Regulatory Fees. (a) Local government units are authorized to collect the Mayor's permit fee and other regulatory fees and charges from the head office, branch, refining plant, depot, storage facility, warehouse of oil companies and all other petroleum business within their jurisdiction. (b) The conduct or operation of two or more related businesses by any one person, natural or juridical, shall require the issuance of a separate Mayor's permit for each business. (c) Oil companies shall not be required to pay Mayor's permit and other regulatory fees in localities where they do not directly operate any office, branch, plant or depot notwithstanding the collection of retailer fees from gasoline station operators. (d) No such fee or charge shall be based on capital investment or gross sales or receipts or volumes of the person or business liable therefor. Section 6. Repealing Clause. All rules, regulations, orders, and/or circulars previously issued by this Department, which are contrary to, or inconsistent with, the provisions of this Circular are hereby repealed or modified accordingly. Section 7. Effectivity. This Circular shall take effect immediately. (SGD.) MARGARITO B. TEVES Secretary