Law Summary

Introduction

Presidential Decree No. 852, signed on December 19, 1975, was issued to amend Presidential Decree No. 551, addressing the need to equalize fuel costs for electricity generation and city gas manufacturing in the Philippines.

Section 1: Franchise Tax on Electric Utilities and City Gas

• Legal Principle: Establishes a uniform franchise tax for franchises involving electric power generation and city gas manufacturing.
• Key Definitions:
  • “Franchise Tax”: A tax on gross receipts from the sale of electric current and city gas.
• Requirements:
  • Franchise tax set at 2% of gross receipts.
  • Payment due to the Commissioner of Internal Revenue or authorized representative by the 20th day of the month following the end of each calendar quarter or as specified by respective franchises or municipal regulations.
• Cross-References: Overrides any contrary provisions in the Local Tax Code or other laws regarding taxes on earnings, receipts, or income.

Section 2: Tariff Heading Adjustments

• Legal Principle: Modifies the duty rates for specific petroleum products under the Tariff and Customs Code.
• Requirements:
  • Tariff Heading No. 27.09 amended to reflect:
    • 10% Duty for fuel oils used in electric power generation and city gas manufacturing.
    • 20% Duty for other petroleum oils.

Section 3: Tax Refunds and Credits

• Legal Principle: Introduces a system for tax credits on petroleum oils used for electric power and city gas production.
• Key Definitions:
  • “Refund or Tax Credit”: A financial return or credit applied against duties imposed on crude oils.
• Requirements:
  • Refunds or credits allowed up to 50% of the duty on crude oils imported by non-electric utilities if sold to electric utilities.
  • Governed by rules set by the Commissioner of Customs with the Secretary of Finance's approval.

Section 4: Consumer Cost Savings and Compliance

• Legal Principle: Mandates that savings from tax reductions be passed on to consumers.
• Requirements:
  • Electric franchise holders must pass on savings to ultimate consumers.
  • The Secretary of Finance to issue implementing rules and a reporting system.
• Penalties for Non-Compliance:
  • Fines up to P50,000 and/or imprisonment for up to six months for violations.
  • Potential orders for compulsory price reductions, applicable retroactively or prospectively.
  • Liability extends to management personnel in case of violations by juridical persons.

Section 5: Effectivity

• Legal Principle: This Decree shall take effect immediately.

Key Takeaways

• A uniform franchise tax of 2% applies to electric utilities and city gas manufacturers, overriding local tax laws.
• Adjustments to tariff rates for petroleum products are specified, promoting reduced costs for specific uses.
• Tax credits are available for crude oil used in electric generation and city gas, fostering economic efficiency.
• Consumer savings from tax reductions must be passed on, with strict penalties for non-compliance to ensure adherence.
• The decree is effective immediately from the date of signing.