Revocation of Diesel Fuel Tax Exemption

Executive Order No. 794 is issued under the President’s powers under Section 401 of Presidential Decree No. 1464, as amended.
The Order also relies on Section 1 of Presidential Decree No. 1610.
The diesel fuel exemption being withdrawn was granted under LOI No. 839.
LOI No. 1068 previously lifted tax and duty exemptions on specified petroleum products including premium and regular motor gasoline, naphtha, natural gas liquids and kerosene.
LOI No. 1135 previously lifted the tax and duty exemption on liquefied petroleum gas.
Earlier authorization under Presidential Decree No. 1610 allowed tax- and duty-free importation of certain petroleum products during supply emergencies, including liquefied petroleum gas, motor gasoline, naphtha and natural gas liquids.

The President recognizes a petroleum product supply emergency framework under Presidential Decree No. 1610 that previously permitted tax- and duty-free importation when supplies became critical.
The Order states that easing of supply shortages for some petroleum products required earlier withdrawal of incentives under LOI No. 1068 and LOI No. 1135.
The Order finds that diesel fuel spot prices have dropped such that oil companies could import diesel fuel and earn sufficient profit without the earlier tax- and duty exemption.
The Order identifies a projected windfall profit of some P71 Million if the diesel fuel tax and duty exemption continued at then-current spot price levels.
The Order determines that maintaining an incentive mechanism to a limited extent is necessary to assure the country’s diesel fuel supply.
The Order limits that incentive to imports by the state-owned Philippine National Oil Company to help check windfall profits and indirectly recover revenue losses from continuing exemptions.

Section 1 withdraws the tax and duty exemption on diesel fuel granted under LOI No. 839.
The withdrawal under Section 1 applies to the diesel fuel incentive previously enjoyed under LOI No. 839.

Section 2 authorizes Philippine National Oil Company (PNOC) to import diesel fuel free from Customs duties and all other importation taxes and charges.
Section 2 requires prior clearance of the Bureau of Energy Utilization before PNOC imports diesel fuel under this authority.
Section 2 limits PNOC’s authorized imports to volumes of diesel fuel as may be necessary to alleviate the diesel fuel supply shortage in the country.

Section 3 provides that Executive Order No. 794 takes effect immediately.
The practical implementation proceeds through PNOC imports that receive prior clearance from the Bureau of Energy Utilization under Section 2.