Prescribing the Guidelines and Procedures for the Processing of Pending Claims for Tax Credit/Refund of Excise Tax paid on Petroleum Products

August 10, 2006 REVENUE MEMORANDUM ORDER NO. 19-06 SUBJECT : Prescribing the Guidelines and Procedures for the Processing of Pending Claims for Tax Credit/Refund of Excise Tax paid on Petroleum Products TO : All Internal Revenue Officers and Others Concerned I. Background Under Section 135 of the Tax Code of 1997 ("Tax Code"), sale of petroleum products to international carriers and certain exempt entities or agencies is exempt from excise tax. However, under Section 130(A)(2) of the Tax Code (formerly Section 127(a) of the Tax Code of 1993), excise tax on locally manufactured petroleum products is required to be paid within ten (10) days from the date of removal of such products for the period from January 1, 1998 to June 30, 1998; within five (5) days from the date of removal of such products for the period from July 1, 1998 to December 31, 1998; and, before removal from the place of production of such products from January 1, 1999 and thereafter. Also, under Section 131(A) of the Tax Code (formerly Section 128(a) of the Tax Code of 1993), excise tax on imported petroleum products is required to be paid before the release of the imported articles from the customs house. Typically, therefore, petroleum products sold and delivered to qualified purchasers are sourced from tax-paid inventories (i.e., ex-depot or ex-installation), and that by virtue of the tax-exempt privilege enjoyed and invoked by these qualified purchasers, they are billed net of excise tax on such tax-paid petroleum products. Under existing BIR Rulings, the recourse of the seller is to claim for refund or tax credit of the excise taxes paid (BIR Ruling Nos. 36-99, 51-99, DA-038-98, and Sec. 15, Rev. Regs. 6-67). The oil companies have filed claims for tax credit/refund of excise tax paid on petroleum products sold to international carriers and exempt entities or agencies pursuant to Section 135 of the Tax Code of 1997. However, due to the absence of a standard checklist of documentary requirements, many of these pending claims have remained unacted upon; hence, the need to prescribe a checklist of documents required for the processing of the pending claims. II. Objectives 1. Prescribe the checklist of documentary requirements for the processing of pending claims for tax credit/refund of excise tax paid on petroleum products sold to international carriers and exempt entities or agencies pursuant to Section 135 of the Tax Code; and 2. Facilitate and expedite the processing of such pending claims for tax credit/refund of excise tax paid on petroleum products to further improve taxpayer service. III. Coverage This Order shall apply to existing/pending claims for tax credit/refund of excise tax paid on petroleum products that have already been filed with RDOs, LTAID I, LTAID II and LTDOs as of the effective date of this Order, relative to the following: 1. Sale and delivery of tax-paid petroleum products by a local manufacturer/producer or importer to international carriers, pursuant to Section 135(a) and (b) of the Tax Code; 2. Sale and delivery of tax-paid petroleum products by a local manufacturer/producer or importer to international organizations (e.g., UNICEF, WHO, UNDP, UNHC-Refugees, FAO, etc.) pursuant to Section 135(b) of the Tax Code; 3. Sale and delivery of tax-paid petroleum products by a local manufacturer/producer or importer to entities exempt from direct and indirect taxes (e.g., ADB, NPC, IRRI, entities registered with PEZA, SBMA, etc.) pursuant to Section 135(c) of the Tax Code. IDcHCS Claims for tax credit/refund of excise tax paid on petroleum products sold to qualified purchasers under Section 135 of the Tax Code of 1997 that are filed after the effectivity of this RMO shall be governed by a separate issuance. IV. Checklist of documentary Requirements The BIR office where the claim for the tax credit/refund is pending shall process and act on the pending claims upon complete submission of all documents listed in Annex A hereof. V. Effectivity This order shall take effect immediately. (SGD.) JOSE MARIO C. BUAG Commissioner of Internal Revenue ANNEX "A": LIST OF DOCUMENTS TO BE SUBMITTED FOR CLAIMS FOR EXCISE TAX CREDIT/REFUND ON PETROLEUM PRODUCTS CLAIM TYPE DOCUMENT TO BE PURPOSE SUBMITTED 1. Sale and delivery of tax-paid Withdrawal Certificates (WCs)/ To determine the volume of petroleum products withdrawn petroleum products to international Summary of Daily Liftings/ from which the petroleum products sold subject of the carriers pursuant to Section 135(a) Summary of Removals; In case of claim were sourced. and (b) sale to international airlines, liquidation statements Excise Tax Return, Bank Official To confirm payment of excise tax due on the volume of Receipts (in the case of a local petroleum products withdrawn as reflected in the manufacturer/producer) or IEIRD corresponding WCs. (in the case of an importer) Delivery receipts duly To determine the volume of petroleum products acknowledged by the authorized delivered to the international carrier. representative of the international To confirm the fact of delivery of petroleum carrier products to the international carrier. Sales invoice issued in the name of Claimant is a local manufacturer/producer or importer: the international carrier and/or in To ascertain if the amount billed by the claimant for the name of the international the sale and delivery of petroleum products to carrier "c/o Name of Intermediary international carriers is net of excise tax. Party/Broker" If it cannot be determined from the invoice that the amount billed is net of excise tax, other supporting documents, such as, but not limited to, computer system-generated print-out of pricing conditions, if applicable, certification under oath from claimant as to the pricing, certification under oath from the buyer that the amount billed is net of the corresponding excise tax, an invoice bearing the notation "no excise tax", and a contract stating that the price is net of excise tax, etc. may be submitted for evaluation. Official receipt issued in the name Claimant is a local manufacturer/producer or importer: of the international carrier and/or to ascertain if the amount collected by the claimant in the name of the international for the sale and delivery of petroleum products to carrier "c/o Name of Intermediary international carriers is net of excise tax. Party/Broker" Bunkering Permit (BP) issued by To determine the country of registry of the the BOC (in the case of sales to international vessel. international vessels) To prove use or consumption outside the Philippines. Copy of any one of the following: To prove that the country of registry of the international Certification from the DFA carriers exempts from similar taxes petroleum products of the list of countries sold to Philippine carriers. granting excise or similar A copy of the Air Transport Service Agreement may be tax exemption to submitted for evaluation, for the purpose. Philippine-registered international carriers; or Certification from the Embassy/Consular Office of the country concerned, duly validated by the DFA. 2. Sale and delivery of tax-paid Withdrawal Certificates (WCs) To determine the volume of petroleum products withdrawn petroleum products by a local from which the petroleum products sold subject of the manufacturer/producer or importer to claim were sourced. exempt entities or agencies pursuant to Section 135(b) Excise Tax Return, Bank Official To confirm payment of excise tax due on the volume of Receipts (in the case. of a local petroleum products withdrawn as reflected in the manufacturer/producer) or IEIRD corresponding WCs. (in the case of an importer) Duplicate original of delivery To determine the volume of petroleum products receipts delivered to the exempt entity or agency. To confirm the fact of delivery of petroleum products to the exempt entity or agency. Duplicate original of sales invoice To ascertain if the amount billed by the claimant for issued in the name of the exempt the sale and delivery of petroleum products to the entity or agency exempt entity or agency is net of excise tax. If it cannot be determined from the invoice that the amount billed is net of excise tax, other supporting documents, such as, but not limited to, computer system-generated print-out of pricing, if applicable, certification under oath from claimant as to the pricing, certification under oath from the buyer that the amount billed is net of the corresponding excise tax, an invoice bearing the notation "no excise tax", and a contract stating that the price is net of excise tax, etc. may be submitted for evaluation. Duplicate original of official To ascertain if the amount collected by the claimant for the receipt issued in the name of the sale and delivery of petroleum products to the exempt exempt entity or agency entity is net of excise tax. Copy of tax treaty, convention or To prove that the purchaser is a qualified exempt other international agreement or entity or agency. Certification from Competent To prove that the country of exempt entities or Authority of country concerned agencies exempts from similar taxes petroleum products sold to Philippine entities or agencies. 3. Sale and delivery of tax-paid Withdrawal Certificates (WCs) To determine the volume of petroleum products withdrawn petroleum products by a local from which the petroleum products sold subject of the manufacturer/producer or importer to claim were sourced. exempt from direct and indirect taxes pursuant to Section 135(c) Excise Tax Return, Bank Official To confirm payment of excise tax due on the volume of Receipts (in the case of a local petroleum products withdrawn as reflected in the manufacturer/producer) or IEIRD corresponding WCs. (in the case of an importer) Duplicate original of delivery To determine the volume of petroleum products receipts delivered to the exempt entity. To confirm fact of delivery of petroleum products to the exempt entity. Duplicate original of sales invoice To ascertain if the amount billed by the claimant for issued in the name of the exempt the sale and delivery of petroleum products to the entity or agency exempt entity or agency is net of excise tax. If it cannot be determined from the invoice that the amount billed is net of excise tax, other supporting documents, such as, but not limited to, computer system-generated print out of pricing, if applicable, certification under oath from claimant as to the pricing, certification under oath from the buyer that the amount billed is net of the corresponding excise tax, an invoice bearing the notation "no excise tax", and a contract stating that the price is net of excise tax, etc. may be submitted for evaluation. In the case of sales and deliveries To confirm registration of the exempt entity with the to entities duly registered with appropriate or relevant government agency or office, which PEZA, SBMA, etc., copy of entitles it to the direct or indirect tax exemption. Certificate of Registration In the case of sales and deliveries To confirm that direct deliveries to power plants is to NPC, copy of the constructive delivery to NPC which owns/operates the Rehabilitation, Operation, power plant/s. Maintenance and Management Agreement (ROMM) Agreement, Power Plant Operation and Maintenance (O&M) Agreement, or other similar agreements, whereby NPC engages an independent contractor to operate and/or maintain NPC-owned power plants for and on behalf of NPC