Petroleum Products Regulations

May 2, 1967 REVENUE REGULATIONS NO. 06-67 SUBJECT : Petroleum Products Regulations TO : All Internal Revenue Officers and Others Concerned SECTION 1. (a) Scope . Pursuant to the authority granted in section 338, in relation to section 4, Commonwealth Act No. 466, otherwise known as the National Internal Revenue Code, as amended, the following regulations prescribing the manner in which the specific tax on petroleum products shall be collected and paid, the procedure to be followed by persons having such oils and by the persons subject to the payment of the said tax, the permits to be secured, and records to be kept by them, and the procedure to be followed by internal revenue officers, are hereby promulgated to supersede all precedents, rulings, and regulations heretofore issued on the same subject. cdlex (b) Petroleum Products Covered by these Regulations . The petroleum products covered by these regulations shall include (1) kerosene or petroleum, (2) lubricating oil, (3) naphtha, gasoline and other similar products of distillation, (4) denatured alcohol to be used for motive power, (5) bunker fuel oil, (6) diesel fuel oil. Consequently, whenever the term "petroleum products" is used in these regulations, the same shall only cover the articles enumerated in this subsection. CHAPTER I Payment of the Specific Tax SECTION 2. Liability of Petroleum Products to the Specific Tax . The specific taxes imposed by the National Internal Revenue Code shall be collected on the petroleum products covered by these regulations which have been manufactured or produced in the Philippines for domestic sale or consumption and on said products which have been imported from the United States or foreign countries. The specific tax on imported petroleum products shall be in addition to the customs duties, if any. SECTION 3. Payment of the Specific Tax on Petroleum Products . (a) On Locally-manufactured Petroleum Products . The specific tax on petroleum products manufactured or produced in the Philippines shall be paid by the manufacturer, producer, owner, or persons having possession of the same immediately before removal from the place of production. However, in case a manufacturer or producer maintains a bonded warehouse for the storage of such products manufactured or produced by him, the specific tax may be paid immediately before removal from the said bonded warehouse. (b) On Imported Petroleum Products . The specific tax on imported petroleum products shall be paid by the owner or importer to the customs offices before the release of the products from the customhouse, or by the person who is found in possession of petroleum products which are exempt from specific tax other than those to whom the same is lawfully issued. However, if the importer maintains a bonded warehouse in a port of entry for the storage of said products, the specific tax may be paid immediately before removal from the said warehouse. SECTION 4. Amount of Specific Tax Payable on Petroleum Products . The amount of specific tax payable on petroleum products are as follows: (a) On kerosene or petroleum, P0.02 per liter of volume capacity; (b) On lubricating oils, P0.07 per liter of volume capacity; (c) On naphtha, gasoline, and all other similar products of distillation, P0.08 per liter of volume capacity; (d) On denatured alcohol to be used for motive power, P0.01 per liter of volume capacity; (e) On fuel oil, commercially known as bunker fuel oil, and on all similar oils, having more or less the same generating power, P0.40 per metric ton; (f) On fuel oil, commercially known as diesel fuel oil, and on all similar fuel oils, having more or less the same generating power, P1.00 per metric ton. If the denatured alcohol is mixed with gasoline, the specific tax on which has already been paid, only the alcohol content shall be subject to the tax herein prescribed. For the purposes of section 4(d) hereof, the removal of denatured alcohol of not less than one hundred eighty degrees proof (90% absolute alcohol) shall be deemed to have been removed for motive power, unless the contrary is shown. CHAPTER II Requirements of Persons or Entities Engaged in the Importation or Manufacture of Petroleum Products SECTION 5. Prior Approval of the Commissioner of Internal Revenue Necessary . No person or entity shall engage in the business of importing or manufacturing petroleum products until his application to engage in the said business and a bond filed in connection therewith is approved by the Commissioner of Internal Revenue to secure the payment of the tax. SECTION 6. Application . Any person or entity desiring to engage in the business of producing or importing petroleum products shall first file an application with the Commissioner of Internal Revenue. The application shall state the name of the applicant, trade name, the principal office or place of business, and, in the case of the manufacturer, the place of production of its products. If the applicant is a corporation or partnership, a certified copy of its articles of incorporation or partnership, a certified copy of its articles of incorporation or co-partnership shall be attached to the application. SECTION 7. Manufacturer's and Importer's Bond. Manufacturers and importers of petroleum products subject to a specific tax shall give bond in an amount equal, as nearly as can be estimated, to twenty per centum of the taxes payable by them during an average year. Such bond shall be conditioned upon the faithful compliance, during the time such business is followed, with the law and regulations relating to such business and for the satisfaction of all fines and penalties imposed by this Code. No such bond shall be required in an amount exceeding fifty thousand pesos nor be received in a sum less than one thousand pesos. SECTION 8. Processing and Approval of Applications . Upon receipt of the application together with the required documents attached thereto, the Commissioner of Internal Revenue shall inspect the place of production of the petroleum products in case of locally manufactured products. If the Commissioner of Internal Revenue finds that the place of production as well as the bond filed complies with existing laws and regulations, the application shall be approved. In like manner, the application filed by a person or entity desiring to import petroleum products shall be approved if the application as well as the bond filed complies with the requirements of the law and these regulations. Upon approval of the application, schedule, paragraph and assessment number shall be assigned to the manufacturer or importer. Places of manufacture of petroleum products subject to specific tax must have only one (1) main opening so as to prevent unlawful removal of said products. They must be so located as to be easily accessible to all internal revenue officers at all time. CHAPTER III Maintenance of Bonded Warehouse SECTION 9. Who and Where to Maintain Bonded Warehouses . Any manufacturer or importer of petroleum products may maintain a bonded warehouse exclusively for the storage of said petroleum products. In the case of locally-manufactured products, the said bonded warehouse shall be maintained within the premises of the factory, refinery or place of manufacture of the products. In the case of imported petroleum products, the said bonded warehouse shall be maintained in any port of entry. SECTION 10. Application to Maintain Bonded Warehouse . Any person or entity engaged in the manufacture or importation of petroleum products and desiring to maintain a bonded warehouse may file an application with the Commissioner of Internal Revenue stating the name of the applicant, assessment number, place of business, place of production, place where bonded warehouse shall be maintained, capacity of the bonded warehouse and place of the bonded warehouse. Upon receipt of the application, the Commissioner of Internal Revenue shall cause the inspection of the site where the bonded warehouse is located. If the application complies with the requirements of the laws and regulations that a bond as required in section 11 of these regulations is filed, the same shall be approved. cdtech SECTION 11. Bond for the Bonded Warehouse . No application for the maintenance of a bonded warehouse shall be approved unless a bond is filed to secure the payment of the specific taxes due on the products stored in the warehouse. The amount of the bond shall not be less than the amount of the specific taxes due on the total capacity of the bonded warehouse. SECTION 12. Joint Custody of the Bonded Warehouse . The bonded warehouse maintained by producers of petroleum products shall be under the joint custody of the Bureau of Internal Revenue and the manufacturer. In such a case, the former shall assign internal revenue storekeepers in the said warehouse. The bonded warehouse maintained by importers of petroleum products shall be under the joint custody of the Bureau of Customs and the importer, the former being considered the agent of the Bureau of Internal Revenue as regards the collection of internal revenue taxes on imported articles. In such a case, the Bureau of Customs shall assign bonded storekeepers in the said warehouse. CHAPTER IV Exemption and Refund of Specific Taxes on Petroleum Products SECTION 13. Exemption from the Specific Tax on Petroleum Products . No specific tax shall be collected on locally produced or manufactured petroleum products which shall be removed by the manufacturer for exportation and is actually exported without returning to the Philippines. Consequently, gasoline and other petroleum products consumed by foreign airlines are subject to the specific tax, although this consumption may take place outside of Philippine territory, the products not having been removed for exportation by the manufacturer thereof but by the foreign airline. In such case, the specific tax due on the product must be paid prior to removal from the place of manufacture or bonded warehouse. a. Notice of Export Shipment . Any manufacturer who removes petroleum products for export shall immediately prior to said removal, notify the Commissioner of Internal Revenue of the intended removal, giving the kind of products, the quantity and the country of destination. The discovery of any such product in transit in regard to which no notification has been received shall be deemed prima facie evidence of the illegal removal of the same, and shall subject them to forfeiture. b. Delivery Direct to Vessel or Means of Transportation . All petroleum products removed free of the specific tax for export shall be sent direct from the place of production to the vessel means of transportation carrying them outside of the Philippines. c. Proof of Exportation . Exporters of petroleum products that would be subject to a specific tax if sold or removed for consumption in the Philippines are required to submit proof of exportation satisfactory to the Commissioner of Internal Revenue. Proof of exportation will not be deemed satisfactory unless submitted within thirty (30) days from the date of removal from the place of production, except when the producer submits proof that the product is still being held for exportation. The proof of exportation satisfactory to the Commissioner of Internal Revenue shall consist of a certified copy of the bill of lading on the back of which the exporter shall execute a certificate in the following form: ________________, Philippines ________________, 19 ___ I hereby certify that this shipment was removed on ________________ for exportation to _____________________ on board _______________________ which left on ___________________________. (Name of vessel) ______________________ Signature of exporter In cases where the proof of exportation is not submitted within the thirty-day period, or where such proof is submitted within the period, but the same is not satisfactory, the manufacturer or exporter shall be required to pay the specific tax. Such payment shall be entered in the official register book of the producer stating the date and number of the official receipt covering the payment. d. Exporter's Bond . When deemed necessary, an exporter shall be required to give a bond for an amount equivalent to the specific tax due on the exported petroleum product prior to the removal of the product for shipment, conditioned upon the exportation of the same in good faith. SECTION 14. Exemptions of Naphtha : Conditions for Exemption . Pursuant to Republic Act No. 4068, any person or entity engaged in the manufacture of chemical products, including the direct reduction of iron ore shall be entitled to exemption from the payment of the specific tax in respect to their local importation of naphtha, under the following conditions: a. That the naphtha has the following specifications: Gravity, API 60 to 88 Distillation, ASTM P 80 to 450 Total Sulfur, wt. % 0.01 to 0.2 Unsaturates, Vol. % trace to 1.0 Aromatics, Vol. % trace to 30 b. That the naphtha will be used directly and exclusively as feedstock or raw material and that, in the course of manufacture, its chemical structure is changed. c. That the naphtha will be stored separately and such storage shall be provided with facilities to measure or record the quantity of naphtha used as raw material or feedstock. d. That the shipping and supporting documents covering the local purchase or importation are in the name of the tax-exempt firm to whom the goods shall be delivered directly. However, persons and entities enjoying tax exemption privileges on its local purchase and importations of raw materials under other existing laws shall not enjoy tax exemption from the payment of the specific tax as provided under Republic Act No. 4068 without relinquishing said tax exemption privileges under other laws insofar as its local purchase and importation of naphtha are concerned. This tax exemption from the payment of the specific tax on naphtha shall be effective only for the period from January 1, 1965 to December 31, 1969. SECTION 15. Refund of Specific Tax on Petroleum Products Used by Tax-exempt Agencies . Pursuant to appropriation acts, the Armed Forces of the Philippines is hereby allowed to purchase fuel oils free of the specific tax, if such products will be used by it exclusively for military purposes, provided, however, that said tax-free purchases will be enjoyed only for as long as the same tax-exempting provision is embodied in subsequent appropriation acts or any other law. Armed forces of the United States as well as foreign embassies, legations and consulates as well as international organizations which under the provisions of the international law, or agreement or treaty are tax-exempt agencies may purchase petroleum products free from the payment of the specific tax, provided that said products will be used by said agencies in the performance of their official duties. Gasoline companies engaged in the manufacture or importation of petroleum products are hereby allowed to sell and deliver said products to the abovementioned tax-exempt agencies without adding to the purchase prices thereof the corresponding specific taxes which they have paid thereon. For every purchase of petroleum products by a tax-exempt agency, the gasoline company concerned shall issue an invoice therefor while the former shall issue a tax-exemption certificate to be signed by the commanding officers (in the case of the Armed Forces) or by the Head of the agency (in the case of the other tax-exempt agencies) duly designated for the purpose. The tax exemption certificate shall contain the following data: Invoice number, date, kind and quantity of product sold, the unit price and the invoice value thereof, exclusive of the specific tax. The quantity appearing in the tax exemption certificates as well as the invoices should be in terms of the measurements specified in the National Internal Revenue Code. For example, gasoline, lubricating oil and kerosene should be in terms of liters and not in gallons, drums or tin cans, while diesel fuel oil, bunker fuel oil or other similar oils should be in terms of metric tons and not in liters, gallons or drums. In addition, the tax-exemption certificate shall certify that the articles described therein were purchased to be used exclusively for the agency's official use in the performance of the agency's official duties. In the case of the Armed Forces, the certification shall state that the articles were purchased exclusively for military purposes. In case any of the above-mentioned tax exempt agencies purchase petroleum products out of stocks not bonded or where the specific taxes have been paid, the gasoline company concerned shall file a claim for refund or tax credit of the corresponding specific taxes paid by it. The claimant should submit the following papers to the Commissioner of Internal Revenue: a. Original copies of the certificates of tax exemption covering the purchases of petroleum products, b. Copies of the sales invoices issued by the claimant covering the purchases of petroleum products, c. Photostatic copies of the official receipts evidencing payment of the specific tax. The claim for refund or tax credit should be filed within two (2) years from the date of payment of the tax. In case a claim for tax credit has been filed and the same has been approved, the Commissioner of Internal Revenue shall issue a tax credit certificate. CHAPTER V Books and Records SECTION 16. Record to be Kept by Importer . Every person or entity engaged in the importation of petroleum products subject to specific tax shall keep an official Register Book wherein shall be entered the following: (a) On the Debit Side Date of importation, name of foreign exporter, kind of product imported, quantity imported and received, amount of specific taxes paid and number and date of the official receipt covering payment. (b) On the Credit Side Date of removal, consignee, kind of product sold, quantity removed, and remarks. At the end of the month, the importer shall certify that the entries in the page of the official register book contains true and complete account of all petroleum products imported during the month, in the case of the debit side, and those removed, sold or disposed of during the month, in the case of the credit side. SECTION 17. Record to be Kept by Manufacturer . Every person or entity engaged in the manufacture or production of petroleum products subject to specific tax shall keep an official register book wherein shall be entered the following: a. On the Debit Side Every manufacturer shall, at the close of the day's business, on such days as its factory is in operation, enter in this side, the kind of products manufactured and the quantity manufactured. b. On the Credit Side At the time of any removal of petroleum products, the manufacturer shall immediately enter on this side and in the proper columns the kind of product removed, the consignee, the date of removal, the quantity removed, the amount of specific tax paid and the number and date of the official receipt covering payment. At the end of the month, the manufacturer shall certify that the entries on the page of the official register book contains a true and complete account of all petroleum products manufactured during the month, in the case of the debit side, and those removed, sold or disposed of during the month, in the case of the credit side. SECTION 18. Transcript Sheets . Every importer or manufacturer shall promptly at the end of each month and not later than the eight day of the succeeding month make a report to the Commissioner of Internal Revenue, a true and exact transcript of all entries made on both the "Debit" and "Credit" pages of his official register book during the preceding month. The importer or manufacturer shall make the same certification as required in the official register book. The transcript forms shall be identical in the form with the debit and credit pages of the official register book. SECTION 19. Separate Book for Bonded Warehouse . Petroleum products may be removed from the customs house or the place of production free of the specific tax, if the same is transferred for storage in a bonded warehouse duly authorized for such purpose by the Commissioner of Internal Revenue. The specific tax shall be paid only upon removal from such bonded warehouse. This being the case every importer or manufacturer of petroleum products maintaining a duly authorized bonded warehouse shall keep a separate record for such warehouse. Such records shall be entered the kind and quantity of petroleum products removed, the specific tax paid and the number and date of the official receipt covering payment. SECTION 20. Books and Forms to be Provided by the Commissioner of Internal Revenue . The official register books, transcript forms and the record in the bonded warehouse shall be provided by the Commissioner of Internal Revenue and shall be given to the importer or manufacturer of petroleum products after he has received a permit to engage in his business. If the importer or manufacturer imports or manufactures more than one (1) kind of petroleum product, he shall keep a separate book or record for each and every kind of product. These books and records shall be produced for inspection upon demand at any time by internal revenue officers. CHAPTER VI Accounting of Petroleum Products Purchased by Airline Companies Enjoying Tax Exemption SECTION 21. Tax-free Purchase of Petroleum Products by Airline Companies Airline companies enjoying exemption from the payment of the specific tax may purchase locally-manufactured petroleum products from manufacturers thereof the same to be removed directly from the place of production or the bonded warehouse without the payment of the corresponding specific tax. SECTION 22. Books of Accounts to be Kept . Tax-exempt airline companies shall keep separate books of accounts to record the quantities of tax-free petroleum products purchased and received by them and the removals of such products for consumption by their aircraft. The books of accounts of airline companies shall at all times be subject to inspection by internal revenue officers, in accordance with the bookkeeping regulations. SECTION 23. Storage Tanks . The said airline companies shall establish and maintain storage tanks for the gasoline, lubricating oil and other petroleum products purchased by them tax-free. Stocktaking of the contents of these tanks may be made by internal revenue agents from time to time to determine whether the tax-exempt fuels purchased by the airlines are devoted exclusively for the use of their aircraft and no part thereof are diverted for other purposes. SECTION 24. Use of Other Storage Tanks ; Withdrawals Thereof . Until such time as the said airline companies mentioned above can provide themselves with their own storage tanks, permission may be granted upon previous request in writing for the said companies to use the storage facilities of gasoline companies. In such case, airline companies shall not withdraw from such storage tanks quantities in excess of their own purchases. SECTION 25. Submission of Report . The airline companies shall submit to the Commissioner of Internal Revenue a report of all purchases and consumption of tax-exempt gasoline and other petroleum products once every quarter of the year, which report shall contain all necessary details required by these regulations and shall be filed within twenty (20) days after the end of such quarter. CHAPTER VII Penal Provisions SECTION 26. Unlawful Possession or Removal of Petroleum Products Subject to Specific Tax . Any person who is found in possession of petroleum products subject to specific tax, the tax on which has not been paid in accordance with law, or any person who is found in possession of such products which are exempt from specific tax other than those to whom the same is lawfully issued shall be punished by a fine of not less than ten times the amount of the specific tax due on the product found but not less than P200 nor more than P5,000 and by imprisonment of from 4 months and 1 day to 4 years and 2 months. Any manufacturer, owner or person in charge of any petroleum product subject to specific tax who removes or allows or procures the unlawful removal of any such product from the place of manufacture or bonded warehouse, upon which product the specific tax has not been paid in the time and manner required, and any person who knowingly aids or abets in the removal of such articles as aforesaid, or conceals the same after illegal removal, shall for the first offense be punished by a fine of not less than 10 times the amount of the specific tax due on the product removed, but not less than P500 nor more than P10,000 and by imprisonment of not less than 6 months and 1 day nor not more than 6 years. Every manufacturer so offending shall, before continuing or resuming business, execute a bond double the amount of his original bond and containing the same conditions. The mere unexplained possession of petroleum product subject to specific tax, the tax on which has not been paid in accordance with law, shall be punishable under this section. In applying the above scale of penalties, if the offender is an alien, he shall be deported after serving the sentence without further proceedings for deportation. If the offender is a government official or employee, the penalty shall be the maximum as hereinabove prescribed and, the offender shall suffer an additional penalty of perpetual disqualification for public office, to vote and to participate in any election. SECTION 27. Violation of the Provisions of these Regulations . A person who violates any provision of these regulations for which delinquency no specific penalty is provided by law, shall be punished by a fine of not more than P300 or by imprisonment for not more than 6 months, or both. SECTION 28. Forfeiture of Petroleum Product Illegally Stored or Removed . All petroleum products subject to specific tax which are stored or allowed to remain in a bonded warehouse or place of manufacture after the tax thereon has been paid shall be forfeited and all petroleum products unlawfully removed from any such place or from customs custody, or brought or received in this country not through the Bureau of Customs without the payment of the required tax shall likewise be forfeited. SECTION 29. Violation of Section 14 of these Regulations . Any person who violates section 14 of these regulations shall subject the offender to cancellation of his exemption privileges and to the payment of double the specific taxes involved; and to imprisonment of not more than 2 nor more than 4 years and a fine of not less than P10,000 nor more than P20,000. Where the offender is a partnership, corporation or other entity, the president, manager or person in charge thereof shall be criminally responsible therefor and, in the case of an alien, he shall be deported. Effectivity SECTION 30. Date of Effectivity . These regulations shall take effect upon publication in the Official Gazette. aisadc EDUARDO Z. ROMUALDEZ Secretary of Finance Recommended by: MISAEL P. VERA Commissioner of Internal Revenue ATTACHMENT 1st Indorsement October 2, 1969 Respectfully returned to the Commissioner of Internal Revenue, Manila, the attached proposed Revenue Regulations No. 6-67, requesting his comment thereon in the light of the attached recommendations of the Petroleum Institute of the Philippines, Inc.; and also to update the said proposed Revenue Regulations with the advice that it should be thoroughly restudied and reviewed to conform to existing circumstances since it appears that it is dated May 2, 1967 but has been transmitted to this Department only recently. cd ROMAN A. CRUZ, JR . Acting Secretary MEMORANDUM for Mr. Abraham Revenue Regulation No . 6-67 Petroleum Products Regulations Page (1) Sec. 3(a) ". . . except as otherwise especially allowed, such taxes shall be paid immediately before removal from the place of production." Under what circumstances? Page (5) On Naphtha provisions in accordance with Republic Act No. 4068. Page (5) Sec. 15. Refund of specific taxes and petroleum products used by miners 25% of specific tax paid . . ." Based on what Republic Act? Page (6) Sec. 16. Refund of Specific tax on petrol products used by tax-exempt agencies. Refer to "Agreement on the Procedure for effecting replenishment of purchases of gasoline and other fuels by Diplomatic mission etc.". This agreement sought to eliminate payment of specific tax why provides for claim for refund? Note: All doubts raised in its Memo have been eliminated in its final proposal. May 29, 1969 The Honorable the Secretary of Finance Finance Building M a n i l a Attention : Mr . Ruben P . Macapinlac Head Executive Assistant Gentlemen : We have the honor to submit, on behalf of our member companies i.e., Caltex (Philippines) Inc., Esso Standard Eastern Inc., Filoil Refinery Corporation, Getty Oil (Philippines) Inc., Mobil Oil Philippines Inc., and the Shell Refining Company (Philippines) Inc., comments on the proposed BIR Petroleum Regulations 6-67, and request that they be given serious consideration inasmuch as these comments are aimed at up-dating the original proposed regulations and incorporate the latest operating agreements covering the handling of petroleum products. cdt Thank you for your attention. Very truly yours, PETROLEUM INSTITUTE OF THE PHILIPPINES, INC. J. P. CARDENAS, JR . Administrator MISSING PAGE SEC. 1(b) Line 3 Delete the word petroleum since it is not used as a synonym for kerosene. In line with the purpose of Sec. 142 of the NIRC to impose specific taxes on petroleum products for motive power, add "when used as motor fuel" to naphtha. The sentence should read: (1) kerosene [or petroleum], (2) lubricating oil, (3) naphtha, when used as motor fuel, gasoline and other similar products of distillation, (4) . . . SEC. 2, Line 6 Delete ["the United States or"]. Already included in the term "foreign countries". SEC. 4 (a) "On kerosene [or petroleum], P0.025 per liter of volume capacity;" Same as in Sec. 1(b) above. (c) "On naphtha, when used as motor fuel , gasoline, and all other similar products of distillation, P0.08 per liter of volume capacity;" Same as in Sec. 1(b) above. (d) Further provisions on denatured alcohol, found in the last paragraph of the Section should be transposed and included in paragraph 4(d), and should read as follows: "(d) On denatured alcohol to be used for motive power, P0.01 per liter of volume capacity. If denatured alcohol is mixed with gasoline, the specific tax on which has already been paid, only the alcohol content shall be subject to the tax herein prescribed. The removal of denatured alcohol of not less than one hundred eighty degrees proof (90% absolute alcohol) shall be deemed to have been removed for motive power, unless the contrary is shown." SEC. 8. The provision on the last paragraph specifying only one main opening should be deleted considering that there are several entrances to blending plant, and should read as follows: "Places of manufacture of petroleum products subject to specific tax [must have only one (1) main opening so as to prevent unlawful removal of said products. They] must be so located as to be easily accessible to all internal revenue officers at all times." SEC. 9. Our understanding is that this Section interprets the provision of Section 154 of the NIRC provides that "An internal revenue bonded warehouse may be maintained in any port of entry for the storing of imported or manufactured goods which are subject to specific tax. The taxes on such goods shall be payable only upon removal from such warehouse and a reasonable charge shall be made for their storage therein. The Commissioner of Internal Revenue may, in his discretion, exact a bond to secure the payment of the tax on any goods so stored." We observe, therefore, that the proposed regulations appear overly restrictive by limiting the location of such warehouses to "within the premises of the factory, refinery or place of manufacture of the products." From 1954, the BIR has authorized the maintenance of bonded warehouses in Pandacan, Sta. Mesa, Poro Point, Cebu City, and Apalit, aside from bonded warehouses at the refinery sites in Bauan and Tabagao, Batangas, Limay, Bataan, and Rosario, Cavite. The proposed Section does not in anyway provide for added revenue to the Government. Nor does it provide for additional control facilities that are not now exercised. By restricting, however, the operational flexibility of the companies, the proposed Section will definitely cause considerable inconvenience and expense that will eventually be reflected in the selling price of all petroleum products. Furthermore, Section 154 (NIRC) does not limit the maintenance of bonded warehouses to manufacturers and importers. SEC. 11. The amount of bond fixed, "The amount of the bond shall not be less than the amount of specific taxes due on the total capacity of the bonded warehouse," is considered oppressive and unnecessary. Section 7 of the proposed regulations already prescribes for a manufacturer's and importer's bond fixed at 20% of the specific taxes paid during an average year. This is in accordance with Section 156 of the NIRC. It is recommended, therefore, that the same basis be used for this Section and that the last sentence be corrected to read as follows: "THE AMOUNT OF THE BOND SHALL BE EQUAL, AS NEARLY AS CAN BE ESTIMATED, TO 20 PER CENTUM OF THE SPECIFIC TAXES DUE ON THE TOTAL CAPACITY OF THE BONDED WAREHOUSE. NO SUCH BOND SHALL BE REQUIRED IN AN AMOUNT EXCEEDING FIFTY THOUSAND PESOS NOR BE RECEIVED IN A SUM LESS THAN ONE THOUSAND PESOS." SEC. 12, Line 4 Add "revenue OR CUSTOMS storekeepers in the said warehouse." SEC. 13. This Section proposes again, to subject to the payment of specific taxes petroleum products used in international flights. It is our impression that this question had been satisfactorily settled with the issuance on 12 July 1965 of BIR Ruling No. 65-079, exempting petroleum products used in international flights from the payment of specific taxes in accordance with Section 123 of the Tax Code, since such fuel and products are not consumed locally. The intention of the proposal is clearly to raise revenue from the sale of fuel and lubricants used in international flights. In fact, however, this will not be the case. We have already previously advised that should the petroleum products used in international flights be subject to specific taxes, the purchase of aviation fuels and lubricants in Manila will be reduced to the barest minimum consistent with safety regulations. This in turn, will most seriously affect the production pattern of local refineries who will have to cut-back on the production of aviation turbo (jet) fuel. Such production imbalances will again, reflect on the selling price of all other petroleum products locally refined. Already such an imbalance has been created by BIR Ruling No. 65-116 dated 5 October 1965, which requires payment of specific taxes on locally manufactured fuels sold to local airlines, while in the same ruling, local airlines are exempted from payment of specific taxes on fuels that they import . Naturally, all local airlines find it preferable to import their aviation fuels, while local refineries have had to cut-back their production and see the business go to foreign suppliers. On the assumption therefore that BIR Ruling 65-079 will remain in force, it is our opinion that Section 13 be corrected as follows: "Sec. 13. Exemption from the specific tax on petroleum products . No specific tax shall be collected on locally produced or manufactured petroleum products which shall be removed by the manufacturer for exportation and is actually exported without returning to the Philippines. [Consequently, gasoline and other petroleum products consumed by foreign airlines are subject to the specific tax, although this consumption may take place outside the Philippine territory, the products not having been removed for exportation by the manufacturer thereof but by the foreign airline. In such case, the specific tax due on the product must be paid prior to removal from the place of manufacture or bonded warehouse.]" No corrections, therefore, are required for Section 13, sub-paragraphs (a), (b), and (c). SEC. 13(d) Recommend that the same 20% basis of the total amount of tax due, be applied in accordance with our comments under Section 11 and the paragraph corrected to read as follows: "When deemed necessary, an exporter shall be required to give a bond for an amount EQUAL, AS NEARLY AS CAN BE ESTIMATED, TO 20 PER CENTUM OF the specific taxes due on the exported petroleum products prior to the removal of the product for shipment, conditioned upon the exportation of the same in good faith; PROVIDED THAT NO BOND SHALL BE REQUIRED FOR PETROLEUM PRODUCTS USED IN INTERNATIONAL FLIGHTS AND ON DIRECT DELIVERIES FROM BONDED WAREHOUSES TO EXPORTING VESSELS; AND PROVIDED FURTHER, THAT WHERE A BOND IS REQUIRED FOR EXPORTATION, SUCH BOND SHALL BE CONSIDERED CANCELLED UPON SUBMISSION OF PROOF OF EXPORTATION." SEC. 15. The procedure governing purchases of petroleum products by tax-exempt agencies and the refund of specific tax on petroleum products used by said agencies, prescribed in the third and fourth paragraphs of this section should be modified to conform with the following agreements: (1) Procedure Governing Purchase of Petroleum Products By the Armed Forces of the Philippines from Oil Companies And the Corresponding Replenishment With Bonded Stocks This agreement was signed last May 20, 1968 by the representatives of the Bureau of Internal Revenue, Armed Forces of the Philippines and the Representatives of the Oil Companies (See Annex " A " for copy of agreement) (2) Agreement On the Procedure For Effective Replenishment of Purchases of Gasoline and Other Fuels By Diplomatic Missions, Consular Establishments and International Organizations and the Privileged Staff Members thereof signed last July 24, 1968 by representatives of the Dept. of Foreign Affairs, Department of Finance, Bureau of Internal Revenue and the Petroleum Institute of the Philippines (See Annex " B " for copy of agreement) Considering that the proposed Petroleum Products Regulations was drafted in 1966, the above-mentioned agreements could not have possibly been taken into consideration. CHAPTER V. Accounting Regulations . In practice, most of the regulations, as proposed, are already being followed. However, the Industry should go on record that the regulations should be sufficiently flexible to allow for the peculiarities of a refining operation which is a process-type production. Provisions requiring that the finished product should be recorded on a daily basis on the days the factory is operating are not entirely compatible with the refining process. A monthly report of completed production would be more appropriate. LLjur May 13, 1969 MEMORANDUM FOR Attorney Valle of the Department of Finance: As requested by you, please be informed that the proposed Revenue Regulations No. 6-67, dated May 2, 1967, covering the subject: PETROLEUM PRODUCTS REGULATIONS, recommended by the Commissioner of Internal Revenue for approval by the Honorable Secretary of Finance were prepared by the Regulations Committee of the Bureau of Internal Revenue. The Petroleum Products Regulations aforesaid was one of the Revenue Regulations forwarded to the Department of Finance, one of which covers cinematographic films or Revenue Regulations No. 7-67 approved by the Honorable Secretary of Finance. The Petroleum Products Regulations as finally recommended for approval have been processed accordingly by the Regulations Committee of the Bureau of Internal Revenue taking into consideration the side or views of the Oil Companies in 1966, as can be seen in the letter dated April 24, 1969 of J. P. Cardenas, Administrator, Petroleum Institute of the Philippines, Inc., addressed to the Honorable Secretary of Finance. If, as alleged in the letter of the said Administrator, new developments warrant further updating of the said Revenue Regulations, it is but proper to hear their views preferably in written memoranda. VICTORIANO S. ALIP Assistant Chief, Tobacco & Miscellaneous Tax Division (Administrative) April 24, 1969 Honorable E. Z. Romualdez Secretary of Finance Finance Building M a n i l a Dear Mr. Secretary : We have been informed that the Bureau of Internal Revenue has submitted for your approval, draft Revenue Regulations 6-67 covering Petroleum Products. Although we have submitted our comments on the originally proposed regulations on May 20, 1966 (copy attached), we respectfully request that in the light of current developments, the industry be given the opportunity to discuss the final draft and present our comments on the proposed regulations. cdlex Thank you for your attention in this matter. Very truly yours, PETROLEUM INSTITUTE OF THE PHILIPPINES, INC. J. P. CARDENAS, JR . Administrator