Prescribing the Rules for the Implementation of the Surtax on Extraordinary Gains Realized by Oil Companies

October 31, 1984 REVENUE REGULATIONS NO. 22-84 SUBJECT : Prescribing the Rules for the Implementation of the Surtax on Extraordinary Gains Realized by Oil Companies in Accordance with Presidential Decree No. 18 89 in Relation to Presidential Decree No. 19 56 and Board of Energy Order Dated October 19, 1984 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 Section 5 of Presidential Decree No. 1889. 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: (a) petroleum products valued or acquired at prices lower than the newly authorized increase in prices for each product, or (b) 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 the surtax imposed by Section 5 of these Regulations. SECTION 3 . Definition of Terms . For purposes of these Regulations, the following definitions of terms are hereby adopted: (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 petroleum 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 2 were authorized, excluding (i) imports still in transit; and (ii) borrowings from other oil companies, but including quantities on loan to others. (c) "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. SECTION 4 . Computation of Extraordinary Gains . - (a) Gains arising from the increase in oil industry netback . The amount of extraordinary gains due to these increases shall be determined on the average by multiplying the inventory of petroleum products, except crude oil, owned as of October 20, 1984, on which the customs duty and special ad valorem duty paid or assessed was computed under the old rate, by 29.20 centavos per liter and by 27.74 centavos in the case of inventory of crude oil which is the average increase in oil industry netback per BOE Order dated October 19, 1984. (b) Gains due to increase in Specific Tax and Ad Valorem Tax . This amount shall be determined by multiplying the inventory of unbonded (tax paid) petroleum product as of October 20, 1984 by the corresponding increase in specific and ad valorem taxes as set by Presidential Decree No. 1956 as shown in Annex A. cdt SECTION 5 . Surtax on Extraordinary Gains . A surtax of sixty-five (65%) per cent is imposed on the total extraordinary gains deemed realized as a result of price and internal revenue tax increases authorized for petroleum products, in addition to the regular income tax as provided for under Title II of the National Internal Revenue Code. The additional levy of 65% shall be allowed as part of the cost of petroleum products sold on or after October 20, 1984. SECTION 6 . Manner and Time of Payment of Surtax . (a) Every person liable to pay the surtax imposed by Presidential Decree No. 1889, shall file a tax return (under BIR Form No. ______) and pay the corresponding surtax due thereon within thirty (30) days after October 20, 1984. (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 of the effective date of the price increases. A separate inventory list for specific tax-paid petroleum products should also be submitted; (4) A computation of the extraordinary gains realized on existing inventory; and (5) The surtax due thereon. (c) If the amount of surtax due is One Million Pesos (P1,000,000) or more, the same may be paid by installment as may be authorized by the Commissioner of Internal Revenue. SECTION 7 . 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 8 . 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 9 . Repealing Clause . All administrative orders and other issuances which are inconsistent herewith, are hereby repealed or modified accordingly. SECTION 10 . Effectivity and Applicability . The surtax imposed by this Decree shall apply to extraordinary gains deemed realized by oil companies as a result of the authorized price increase of October 20, 1984. cd i ALFREDO PIO DE RODA, JR. Acting Minister of Finance Recommended by: RUBEN B. ANCHETA Acting Commissioner ANNEX A BASIS OF INVENTORY GAIN ARISING FROM INCREASE IN SPECIFIC TAXES IN PESO/LITER RATE PREMIUM GASOLINE P .4725 REGULAR GASOLINE .2965 AVTURBO .755 KEROSENE .4595 DIESEL .586 FUEL OIL .1885 L P G .398 LUBE OIL ASPHALTS .0445 WAX, GREASE & PETROLATUM SOLVENTS 1.0365 PROCESSED GAS PETROLEUM PRODUCT PRICE ADJUSTMENTS FOR P14/US DOLLAR EXCHANGE RATE 3% ADDITIONAL DUTY AND P1.1 BILLION ADDITIONAL SPECIFIC TAXES (OVER 7 MONTHS) ADJUSTMENTS PRESENT OIL CO. SPECIFIC RESULTING % IN P/LITER PRICE TAKE TAXES TOTAL PRICE INCREASE PREMIUM GASOLINE 6.47 0.42 0.42 6.89 6.5 REGULAR GASOLINE 6.27 0.26 0.16 0.42 6.69 6.7 AVTURBO 5.901 0.123 0.27 0.393 6.294 6.6 KEROSENE 4.44 0.19 0.26 0.45 4.89 10.1 DIESEL 4.43 0.075 0.385 0.46 4.39 10.4 FUEL OIL 3.404 0.26 0.26 3.664 7.6 L P G 4.346 0.0125 0.2995 0.312 4.658 7.2 LUBE OIL .07 .07 ASPHALTS 3.877 0.28 0.28 4.157 7.2 WAX, GREASE AND PETROLATUM 0.30 0.30 SOLVENTS 5.626 0.19 0.19 5.816 3.4 PROCESSED GAS .015 0.015 AVERAGE AFFECTED VOLUME 4.400 0.086 0.27 0.356 4.756 8.1 TOTAL VOLUME 4.119 0.086 0.187 0.273 4.392 6.6 PETROLEUM PRODUCT PRICES AT P18/U.S. DOLLAR; ADD'L 2% AD VALOREM DUTY ADJUSTMENT PRESENT 4 PESO 2% SUB SPECIFIC DEALER NEW % IN P/LITER PRICE DEV. DUTY TOTAL TAXES MARK IN TOTAL PRICES INCREASE OIL CO. TAKE PREMIUM GASOLINE 6.89 1.226 .074 1.30 .08 .01 1.39 8.28 20.2 REGULAR GASOLINE 6.69 1.176 .074 1.25 .08 .01 1.34 8.03 20.0 AVTURBO 6.294 1.216 .074 1.29 .14 1.43 7.724 22.7 KEROSENE 4.89 1.186 .074 1.26 .05 .01 1.32 6.21 27.0 DIESEL 4.89 1.146 .074 1.22 .08 .01 1.31 6.20 26.8 FUEL OIL 3.664 .867 .074 .941 .04 .981 4.645 26.8 L P G 4.658 1.029 .074 1.103 .07 .01 1.183 5.841 25.4 ASPHALTS 4.157 .867 .074 .941 .07 1.011 5.168 24.3 SOLVENTS 5.816 1.186 .074 1.26 .11 1.37 7.186 23.6 AVERAGE AFFECTED VOLUME 4.756 1.026 .074 1.10 .067 .01 1.177 5.933 24.7 TOTAL VOLUME 4.392 1.026 .074 1.10 .047 .003 1.15 5.542 26.2 (Rev. Regulations No. 12-85) Republika ng Pilipinas Ministri ng Pananalapi KAWANIHAN NG RENTAS INTERNAS National Office Building __________ Division/Branch Quezon City POST-REPORTING NOTICE __________________________________________________________ (Division, Revenue District Office No., or Office Audit Section) ____________________ Date ______________________ ______________________ ______________________ ______________________ S i r : Please be informed that ________________________________ of the _______________________________________________________ (indicate the office conducting the investigation) has submitted his audit report on your _________________ tax liabilities for (kind of tax) __________________. He has recommended a deficiency tax in the amount (period covered) of P __________ exclusive of interest computed as follows: If you are not agreeable to the examiner's findings, you or your authorized representative may arrange for an informal conference with the _______________________________________ within ten (10) days from (head of investigating office) receipt hereof by contacting Mr/s____________________________ at Telephone No. _________________. You may submit at said conference documentary evidence to support any objections you may find against the proposed assessment. If you are sending your representative, please authorize him in writing to act in your behalf. Very truly yours, RUBEN B. ANCHETA Acting Commissioner (or Name of Regional Director and Region No.) By: ____________________________ (Chief of Division, Revenue District Officer or Chief of Office Audit Section) ANNEX B Republika ng Pilipinas Ministri ng Pananalapi KAWANIHAN NG RENTAS INTERNAS National Office Building ______________ Division/Branch Quezon City PRE-ASSESSMENT NOTICE _________________ Date ______________________ ______________________ ______________________ ______________________ Gentlemen/Sir: Pursuant to Section 319-A of the Tax Code, as amended by Presidential Decree No. 1773, there is summarized in Annex ____ hereof the result of investigation conducted under Letter of Authority No. ________ covering your _____________ tax liability for the year(s) __________. If you are not agreeable to the findings, you or your authorized representative may see the Chief, ________________ Division/Branch to clarify issues arising from the investigation and/or review of your tax case. However, if we do not hear from you within fifteen (15) days from receipt hereof, we will presume that you are agreeable to the proposed assessment in which case, the corresponding letter of demand will be sent to you upon approval of the report of investigation. Very truly yours, RUBEN B. ANCHETA Acting Commissioner By: ________________________ Revenue Service Chief (NAO or SOO) or Regional Director Encl.: [ ] Annex "B"-1 [ ] Annex "B"-2 [ ] Annex "B"-3 (Please check appropriate box) ANNEX B-1 COMPUTATION OF INCOME TAX DEFICIENCY ____________________________ Assessment No. _________________ Name of Taxpayer _____________________________ TAN: _________________ Net Income per Return P _________ Add: Disallowances per Investigation: P _________ _________ _________ _________ _________ _________ P _________ Disallowances per Review: P _________ _________ _________ P _________ Net Income per Investigation and Review P _________ Less: Personal Exemption _________ Net Taxable Income P _________ Income Tax due thereon _________ Less: Tax Credits a) Tax Withheld on Wages (W-2) P _________ b) Tax Withheld at Source (BIR Form 1743) _________ c) Tax Credit on Foreign Income Tax Paid _________ d) Tax Paid per Return CR/OR No. _________ e) Others _________ _________ Deficiency Tax Due P ___________ (f) __________ % Surcharge ___________ Interest from _________ to ________ ___________ Total tax due P ___________ Other Taxes (If any) ________________________________________________ ________________________________________________ ________________________________________________ Total Amount Due P ___________ Additional Explanation (If any) ____________________________________________________ ____________________________________________________ ____________________________________________________ Prepared by: __________________________ Reviewer SIGNATURE OVER PRINTED NAME A P P R O V E D : ____________________________ Authorized Officia l ANNEX B-2 COMPUTATION OF BUSINESS TAX DEFICIENCY _______________________________ Assessment No. _________________ (Name of Taxpayer) TAN No.: ____________________ ______________________________ (Address) Net Income per Return P ___________ Add: Disallowance per Investigation: P __________ __________ __________ __________ __________ __________ P __________ Disallowances per Review: P __________ __________ __________ P __________ ___________ Net Income per Investigation and Review P ___________ Total Taxable Sales/Receipts per Audit: P ___________ ___________ % tax due thereon P ___________ Less: Allowable Tax Credit P _________ Tax Paid per Return _________ __________ Deficiency Sales/Percentage/Fixed Tax Due P ___________ Add: __________ Surcharge ___________ Interest fr. __________ to ________ ___________ Compromise penalty ___________ Total Amount Due and Collectible P ___________ Additional Explanations (If any) _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ APPROVED: Prepared by: ___________________ ____________________________ Reviewer (Printed Name and Signature ANNEX B-3 COMPUTATION OF TRANSFER TAX DEFICIENCY __________________________ Assessment No. ___________________ (Name of Taxpayer) TAN No. ____________________ __________________________ (Address) Net Estate/Gift Tax per Return Add: Disallowances per Investigation: P ___________ P __________ __________ __________ __________ __________ __________ P __________ Disallowances per Review: P __________ __________ __________ P __________ ___________ Net Estate/Gift Tax Investigation and Review P ___________ Net Estate/Gift Subject to Tax after audit P ___________ Tax Due thereon P ___________ Less: Previous Payments: CR/ROS NO. DATE AMOUNT ______________ ____________ _______________ ______________ ____________ _______________ ______________ ____________ _______________ ______________ ____________ _______________ ______________ ____________ _______________ Total Previous Payments ______________ Balance of Estate/Gift Tax Due ______________ Add: _____________ Surcharge ______________ Interest from _______ to ______ ______________ Compromise penalty ______________ T o t a l Amount Due and Collectible P ______________ Additional Explanations (If any) _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ APPROVED: Prepared by: ___________________________ _____________________________ Reviewer Signature Over Printed Name