Conditions for Utilization of Domestic Naphtha
The law stipulates conditions on the use of naphtha processed by domestic refineries:
- Domestic refineries' processed naphtha, if available as determined by the Energy Regulatory Board, must be used before any imported naphtha.
- This prioritization supports local industry and resource utilization.
Tax Treatment of By-Products from Naphtha Processing
By-products resulting from the processing of naphtha into petrochemical products are treated as follows:
- By-products such as fuel oil, diesel fuel, kerosene, pyrolysis gasoline, liquefied petroleum gases, and similar oils with comparable generating power shall be subject to the applicable ad valorem tax in paragraph (b).
- Exception: These by-products are exempt from tax if transferred to local oil refineries by sale, barter, or exchange for further processing or blending into finished products that are taxable under paragraph (b).
Implementation and Regulatory Authority
- The Bureau of Internal Revenue, with approval from the Department of Finance, is tasked to promulgate the necessary rules and regulations for effective implementation of this law.
Effectivity
- The law takes effect 15 days after its publication in the Official Gazette or a newspaper of general circulation in the Philippines.
Important Legal Concepts and Policy Considerations
- The law promotes the use of domestically processed naphtha to encourage local industry and minimize reliance on imports.
- It provides clarity on tax rates for raw materials and by-products in the petrochemical sector.
- Facilitates further processing and refining activities by allowing tax exemptions on by-products when transferred to local refineries for blending or processing.
- Assigns regulatory and implementing powers to ensure proper enforcement and compliance.