VAT Ruling No. 042-02

July 22, 2002 VAT RULING NO. 042-02 R.R. 8-96, 109 148 474-88 41-98 Petronas Energy Philippines, Inc. LPG Import Terminal & Bottling Plant Matab-ang, Dalipuga Iligan City Attention: Mr. Carlos P. Corpuz Financial Controller Gentlemen : This refers to your letter dated December 5, 2001 requesting for exemption from the payment of excise ( ad valorem ) tax and VAT on your importation of Liquefied Petroleum Gas (LPG). In reply, please be informed that as defined under Revenue Regulations No. 8-96 LPG is considered as a petroleum product, thus: "l) Petroleum products products formed in the course of refining crude petroleum through distillation, cracking, solvent refining and chemical treatment coming out as refinery stocks from the refinery such as, but not limited to, LPG, Naphtha, gasolines, solvent, kerosene, aviation fuels, diesel oils, fuel oils, waxes and petrolatums, asphalts, bitumens, coke and refinery sludges, or such refinery petroleum fractions which have not undergone any process or treatment as to produce separate chemically-defined compounds in a pure or commercially pure state and to which various substances may have been added to make them suitable for particular uses; Provided, that the resultant product contains not less than fifty percent (50%) by weight of such petroleum products." On the other hand, the said regulation defines processed gas as: "m) Processed gas it is the lightest by-product/component of refined crude oil and is generated from the various process units like crude distillers; hydro desulphurizers and platformers. It is composed of pressurized gases; like hydrogen, methane, ethane, propane and butane, and is used for refinery fuel. From the foregoing definitions, it can be inferred that LPG is considered as a petroleum product. Pursuant to Section 148(j) of the 1997 Tax Code, liquefied petroleum gas (LPG) is subject to excise tax at 0%, unless it is used for motive power, in which case, it shall be taxed at the equivalent rate as the excise tax on diesel fuel oil. On the other hand, Section 109(e) of the same Code provides that the sale or importation of coal and natural gas, in whatever form or state, and petroleum products (except lubricating oil, processed gas, grease, wax and petrolatum) shall be exempt from the value-added tax. Since, under Revenue Regulations No. 8-96 LPG is a petroleum product, it follows that the importation and sale of LPG is exempt from VAT. This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be disclosed that the facts are different, then this ruling shall be considered null and void. Very truly yours, Commissioner of Internal Revenue By: (SGD.) EDMUNDO P. GUEVARA Deputy Commissioner Legal and Inspection Group