Publishing Presidential Decree No. 1089, Prescribing the Specific Tax on Distilled Spirits or Alcohol To Be Used for Blending with Gasoline or Other Motor Fuels for Motive Power

February 8, 1977 REVENUE MEMORANDUM CIRCULAR NO. 16-77 SUBJECT : Publishing Presidential Decree No. 1089, Prescribing the Specific Tax on Distilled Spirits or Alcohol To Be Used for Blending with Gasoline or Other Motor Fuels for Motive Power TO : All Internal Revenue Officers concerned For the information and guidance of all concerned, quoted hereunder are pertinent portions of Presidential Decree No. 1089 prescribing the specific tax on distilled spirits or alcohol to be used for blending with gasoline or other motor fuels for motive power: "SECTION 1. The provisions of any law to the contrary notwithstanding, ethyl alcohol, denatured alcohol or any distilled spirits, whether rectified or absolute, if produced domestically from locally produced raw materials, and when removed from the place of production or distillery plant by the manufacturer thereof for delivery to oil companies for use by the latter for blending with motor gasoline or other motor fuels to be used for motive power, shall, regardless of proof or alcoholic strength, be subject to specific tax at the same rate as the specific tax on automotive gasoline of the higher octane rating, more commonly known as "premium", "special", "extra" or "boron" gasoline or by some other name of similar meaning or descriptive intent: Provided , That if denatured alcohol for motive power taxable under Section 142 (d) of the National Internal Revenue Code, as amended, shall be further mixed, blended or processed with motor gasoline or other motor fuels as contemplated under this Decree, such denatured alcohol shall be subject to specific tax at the same rate as the tax on motor gasoline of the higher octane rating in lieu of the rate of the tax prescribed under Section 142(d) of the same Code: And, Provided, Further , That if rectified ethyl alcohol, regardless of proof or alcoholic strength, is to be blended with motor gasoline or other motor fuels for motive power as authorized by this Decree, such alcohol must first be suitably denatured and rendered unfit for the manufacture of intoxicating beverages before removal from the distillery, rectifying plant or place of production. "SECTION 2. The Secretary of Finance, upon recommendation of the Commissioner of Internal Revenue, shall promulgate appropriate rules and regulations to implement this Decree. "SECTION 3. This Decree shall take effect upon the issuance of rules and regulations." Amendatory Features of the Decree (1) The prevailing rate of specific tax on domestic distilled spirits prescribed under Section 133(a) of the Tax Code, as amended, does not apply to domestic distilled spirits or alcohol if the same is to be used for blending with gasoline or other motor fuels. In lieu thereof, the current rate of specific tax on gasoline, naphtha and all other similar products of distillation prescribed under Section 142(c) of the same Code shall apply to domestic distilled spirits or alcohol to be used for blending with gasoline or other motor fuels. Illustrative Examples : (a) Domestic distilled spirits removed from compounding alcoholic beverages : ( Specific tax per proof liter = P1 . 00 Sec . 133(a) ). 200 liters at 189 proof = 378 proof liters (p.1.) 378 p.1. x P1.00 per pl = P378 specific tax due (b) If the same quantity of distilled spirits of the same proof (189) is removed to be used for blending with gasoline (Specific tax per liter of gasoline = P0 . 33 Sec . 142(c) ). 200 liters x P0.33 = P66 specific tax due NOTE: Under this case, the alcoholic strength or proof of the distilled spirits is not considered in the computation of the tax base. Aside from that, the prevailing tax rate on gasoline is used in computing the specific tax on the distilled spirits removed for blending with gasoline for motive power purposes. (2) As a general rule, domestic alcohol of not less than 180 proof (90% absolute alcohol) when suitably denatured and rendered unfit for oral intake is exempt from specific tax in accordance with Section 128 of the Tax Code but such denatured alcohol is subject to the percentage tax under Section 186 of the same Code. In accordance with Section 142(d), denatured alcohol to be used for motive power is taxable at P0.01 per liter of volume capacity. The denaturing of said alcohol for motive power purposes is done using BIR-approved denaturing formula "5 parts gasoline to every 100 parts ethyl alcohol." However, if such denatured alcohol is to be further blended with gasoline for motive power in accordance with Presidential Decree No. 1089, the specific tax due on said denatured alcohol is the prevailing rate of specific tax on gasoline (P0.33 per liter) under Section 142(c) instead of P0.01 per liter as prescribed under Section 142(d) of the Tax Code, as amended. (3) In order to safeguard government revenues, Presidential Decree No. 1089 further provides that if any distilled spirits or alcohol is to be blended with gasoline or other motor fuels as authorized by said Decree, such alcohol must first be suitably denatured and rendered unfit for the manufacture of intoxicating beverages before removal from the distillery, rectifying plant or place of production. This is a safeguard against the unlawful manufacture of intoxicating liquors from distilled spirits or alcohol intended for blending with gasoline or other motor fuels for motive power subject to tax at the same rate as gasoline which is much lower than the specific tax on distilled spirits or alcohol being used for compounding intoxicating beverages. (4) Presidential Decree No. 1089 takes effect on February 8, 1977, the date of the promulgation of Revenue Regulations No. 6-77, implementing the provisions of said Presidential Decree. All internal revenue officers and others concerned are hereby enjoined to give this Revenue Memorandum Circular as wide a publicity as possible. aisa dc EFREN I. PLANA Acting Commissioner of Internal Revenue TAN-1456-040-3