Rules for the implementation of the surtax on extraordinary gains realized by oil companies in accordance with Presidential Decree No. 1867

July 7, 1983 REVENUE REGULATIONS NO. 07-83 SUBJECT : Rules for the Implementation of the Surtax on Extraordinary Gains Realized by Oil Companies in Accordance with Presidential Decree No. 1709 n TO : All Internal Revenue Officers and Others Concerned SECTION 1. Scope . These regulations shall govern the implementation of the surtax on extraordinary gains realized by oil companies on petroleum products and is promulgated pursuant to Presidential Decree No. 1709. n SECTION 2. Surtax liability . Any oil company engaged in the importation, processing, refining and marketing of petroleum products, except retail petroleum dealers, who, at the time the new price increases for petroleum products were authorized, has in its inventory: (1) petroleum products valued or acquired at prices lower than the newly authorized increase in prices for each product; or (2) intermediate petroleum products which have appreciated in value due to the increase in the authorized selling prices of the ultimate finished product which are normally manufactured or processed out of said intermediate stocks; shall be liable to a surtax equal to 65% based on the total extraordinary gains (as determined in Section 4 hereof) deemed realized as a result of price increases and/or adjustments authorized for petroleum products. The said tax shall be allowed as part of the cost of petroleum products sold on or after July 1, 1983. SECTION 3. Definitions of terms . For purposes of these regulations, the following definitions of terms are hereby adopted: cdt (a) " Petroleum products " shall include hydrocarbon, crude oil, intermediate refinery stocks, base stocks (including other intermediate petroleum products such as lubricating oil base stocks which are blended into greases and lubricating oils) and all other products enumerated in Sections 153, 155 and 156 of the National Internal Revenue Code. (b) " Inventory of petroleum products " shall mean the actual quantity of petroleum products in the possession of an oil company at the time the new price increases referred to in Section 11 were authorized, excluding (i) imports still in transit; and (ii) borrowings from other oil companies, but including quantities on loan to others. Provided, however , that such inventory shall include any and all stocks that have received price support from the Consumer Price Equalization Fund. (c) " Bonded stocks " shall mean the finished petroleum products which have not been removed and are still stored in the refinery, manufacturing plant or bonded warehouse of the oil company and the specific tax thereon has not been paid. (d) " Unbonded stocks " shall mean the finished petroleum products on which the specific tax has been paid and are still part of the inventory of the oil company; provided, however , that the finished petroleum products which are removed from the place of production but are still part of the inventory of the oil company and the specific tax due thereon is payable within fifteen (15) days from the date of removal thereof as provided for under Section 135 of the National Internal Revenue Code shall be considered as unbonded stocks. cdt (e) " Industry netback " shall represent the oil company revenue from the sale of petroleum products excluding specific taxes and special fund imposts. (f) " Reference price of crude oil " means the price of crude oil established by the Board of Energy for purposes of computing the amount of reimbursement that may be claimed by an oil company from the Consumer Price Equalization Fund. SECTION 4. Computation of extraordinary gains . The amount of total extraordinary gains shall be determined by multiplying the inventory quantity and the corresponding extraordinary gains per unit quantity which are computed in accordance with the following rules: (a) The extraordinary gains per unit quantity for crude oil shall be computed as the difference between the duty-paid landed cost (excluding freight cost) based on the reference price of the petroleum crude oil type as specified in the Board of Energy Order dated March 21, 1981, and the duty-paid landed cost (excluding freight cost) based on the official selling price of the producing countries as of July 1, 1983. The duty-paid landed cost based on the reference price shall not include the 3% special ad valorem duty and shall be computed at the exchange rate of P7.651 per US dollar; on the other hand, the duty-paid landed cost based on the official prices as of July 1, 1983 shall include the 3% special ad valorem duty and shall be determined at the rate of P11.00 per US dollar. (b) The extraordinary gains in the case of finished products and intermediate stocks shall be computed separately for bonded and unbonded stocks. cdt (c) To ensure consistency and accuracy in the computation of the extraordinary gains which will be the base for the computation of the surtax, reference shall be made to rates prescribed in Annex A of these regulations. (1) For bonded stocks the extraordinary gain per unit quantity shall be the increase in industry netback for the particular product as specified in BOE Order dated June 30, 1983. (2) For unbonded stocks the extraordinary gain per unit quantity shall be the increase in the industry netback plus or minus the change in specific tax as the case may be. (3) For intermediate stocks the applicable rate of extraordinary gains shall be that of the finished product to be produced out of the intermediate stock. SECTION 5. Manner and time of payment of surtax . (a) Every person liable to pay the surtax imposed by P.D. 1709 n shall file a tax return (Under BIR Form No. _____) and pay the corresponding surtax due thereon within thirty (30) days after July 1, 1983. Provided, however , that in case the entity or person liable thereto has a valid outstanding receivable from the Consumer Price Equalization Fund, any such receivable may be applied as an offset against the surtax liability under P.D. 1709 n only after a certification by the Ministry of Energy has been issued confirming the amount of the receivable. (b) Such return shall, inter alia , indicate the following information: (1) Name, address and TAN of the taxpayer; (2) Nature of business; (3) Itemized inventory list of petroleum products as the effective date of the price increases. A separate inventory list for specific tax-paid petroleum products should also be submitted; cd (4) A computation of the extraordinary gains realized on existing inventory; and (5) The surtax due thereon. (c) If the amount of surtax due, after off-setting any amount due to an oil company from the Consumer Price Equalization Fund, is P500,000.00 or more, the same may be paid by installment as may be authorized by the Commissioner of Internal Revenue: Provided, however , that in case the entity or person liable thereto has a valid outstanding receivable from the Consumer Price Equalization Fund, any such receivable may be applied as an offset against the surtax liability under P.D. 1709 n only after a certification by the Ministry of Energy has been issued confirming the amount of the receivable. SECTION 6. Place of filing of return and payment of surtax . The surtax on extraordinary gains shall be paid upon filing of the tax return, together with the schedule of inventory of petroleum products, at the Office of the Commissioner of Internal Revenue. SECTION 7. Penalties . The provisions of the National Internal Revenue Code, particularly Title II thereof, shall apply in case of failure to file the tax return and to pay the surtax within the period and in the manner hereinabove prescribed. SECTION 8. Repealing Clause . All regulations, rulings, orders, or portions thereof which are inconsistent with the provisions of these regulations are hereby revoked and or amended. cdt SECTION 9. Effectivity . These regulations shall apply to extraordinary gains deemed not realized by oil companies as a result of the authorized price increase on July 1, 1983. (SGD.) CESAR VIRATA Minister of Finance Recommending Approval: (SGD.) RUBEN B. ANCHETA Acting Commissioner ANNEX A INVENTORY GAIN COMPUTATION A. FINISHED PRODUCTS INVENTORY P/LITER BONDED UNBOUNDED PREMIUM GASOLINE .854 1.134 REGULAR GASOLINE .816 1.096 AVTURBO 1.000 1.000 KEROSENE .598 .553 DIESEL .6495 .522 FUEL OIL .466 .466 L P G .440 .440 ASPHALTS .466 .466 SOLVENTS .598 .598 07.05.83 B. CRUDE NEW OFFICIAL POSTED PRICE REFERENCE PRICE CRUDE PRICE DIFF'L. $/BBL. P/BBL. 1 $/BBL. P.BBL. 2 P/BBL. ARAB LIGHT 32.00 298.69 29.00 399.71 101.02 ARAB MEDIUM 30.91 288.52 27.40 377.65 89.13 ARAB HEAVY 30.01 280.12 26.00 358.36 78.24 ARAB BERRI 33.73 314.84 29.52 406.87 92.03 KUWAIT 30.78 287.31 27.30 376.28 88.97 QATAR MARINE 33.03 308.31 29.30 403.84 95.53 MAYA 28.28 263.97 23.00 317.01 53.04 ISTHMUS 33.82 315.68 29.00 399.71 84.03 WALIO 32.75 305.70 29.00 399.71 94.01 SALAWATI 33.106 309.02 28.75 396.26 87.24 MIRI LIGHT 36.10 336.97 29.85 411.42 74.45 LABUAN 35.58 332.11 30.00 413.49 81.38 SERIA LIGHT 35.86 334.73 30.10 414.87 80.14 CHAMPION 35.265 329.17 29.10 401.09 71.92 SHEMGLI 29.25 273.03 25.00 344.58 71.55 NIDO 30.25 282.36 27.00 372.14 89.78 CADLAO 35.20 328.56 30.615 421.97 93.41 MATINLOC 35.09 327.54 30.36 418.45 90.91 DUBAI 31.83 297.11 28.86 397.78 100.67 NOTES: 1. REFERENCE PRICE IN P/BBL., INCLUDES 22% DUTY. 2. NEW OFFICIAL POSTED PRICE IN P/BBL, INCLUDES 25.3% DUTY. n Note from the Publisher: Written as "1867" in the original document.