Legal basis and affected tax code provisions
- Section 1 amends Section 145 of the National Internal Revenue Code, as amended, on excise taxes for manufactured oils and other fuels.
- Section 2 amends Subparagraph (2) of paragraph (a) of Section 151 of the National Internal Revenue Code, as amended, on excise taxes for certain non-metallic minerals and quarry resources and related natural gas treatment.
- Section 3 amends Subparagraph (4) of paragraph (a) of Section 151 of the National Internal Revenue Code, as amended, on excise taxes for indigenous petroleum.
- Sections 4 to 8 provide transitory, separability, rule-making, repeal/consistency, and effectivity mechanisms within the excise tax system.
Policy and declared purpose
- The law restructures excise tax rates on petroleum products by amending pertinent provisions of the National Internal Revenue Code.
Excise tax on manufactured oils and fuels
- Section 145 requires collection of specific taxes on refined and manufactured mineral oils and motor fuels.
- The excise taxes attach to the goods “as soon as they are in existence as such.”
- Specific taxes are imposed per unit as follows under Section 145(a):
- (1) Lubricating oils and greases (including listed base stocks, extracts, similar preparations, and additives whether petroleum-based or not) at P4.50 per liter of volume capacity.
- (2) Processed gas at P0.05 per liter of volume capacity.
- (3) Waxes and petrolatum at P3.50 per kilogram.
- (4) On denatured alcohol to be used for motive power at P0.05 per liter of volume capacity.
- (5) Naphtha, regular gasoline and other similar products of distillation at P4.80 per liter of volume capacity.
- (6) Leaded premium gasoline at P5.35 per liter of volume capacity, and unleaded premium gasoline at P4.35 per liter of volume capacity.
- (7) Aviation turbo jet fuel at P3.67 per liter of volume capacity.
- (8) Kerosene at P0.60 per liter of volume capacity.
- (9) Diesel fuel oil and similar fuel oils having more or less the same generating power at P1.63 per liter of volume capacity.
- (10) Liquefied petroleum gas (LPG) at P0.00 per liter.
- (11) Asphalts at P0.56 per kilogram.
- (12) Bunker fuel oil and similar fuel oils having more or less the same generating power at P0.30 per liter of volume capacity.
- Section 145 credits and avoids double taxation for lubricants:
- Specific taxes paid on the purchased feedstock (bunker) used in manufacturing excisable articles and forming part thereof must be credited against the specific tax due.
- Lubricating oils and greases produced from base stocks and additives on which the specific tax has already been paid shall no longer be subject to specific tax.
Special product-based exemptions and rules
- Section 145(4) provides an alcohol–gasoline mixing rule:
- If denatured alcohol is mixed with gasoline, only the alcohol content is subject to the tax prescribed.
- Removal of denatured alcohol of not less than one hundred eighty degrees proof (ninety percent absolute alcohol) is deemed removed for motive power unless shown otherwise.
- Section 145(5) provides a zero-rate for naphtha used for petrochemicals and certain power replacement uses:
- Naphtha used as raw material in the production of petrochemical products or as replacement fuel for a natural gas-fired combined cycle power plant during non-availability of locally-extracted natural gas is taxed at Zero (P0.00) per liter of volume capacity.
- The zero-rate is subject to rules promulgated by the Secretary of Energy in consultation with the Secretary of Finance.
- Section 145(5) provides treatment for byproducts from naphtha processing:
- Byproducts including listed fuels and similar oils having more or less the same generating power are subject to the applicable specific tax specified in this section, except when byproducts are transferred to local oil refineries through sale, barter, or exchange for further processing or blending into finished products subject to specific tax under this section.
- Section 145(8) aligns kerosene used as aviation fuel with aviation turbo jet fuel taxation:
- Kerosene used as aviation fuel is subject to the same tax on aviation turbo jet fuel under Section 145(7), assessed on the user thereof.
- Section 145(10) equates LPG motive power taxation with diesel:
- LPG used for motive power is taxed at the equivalent rate as the specific tax on diesel fuel oil.
Excise tax on non-metallic minerals, quarry resources, and natural gas
- Section 151(a)(2) imposes a tax of two percent (2%) on:
- Locally extracted or produced non-metallic minerals and quarry resources based on actual market value of gross output at the time of removal.
- Importation based on the value used by the Bureau of Customs in determining tariff and customs duties, net of excise tax and value-added tax.
- A direct natural gas rule applies under Section 151(a)(2):
- Locally extracted natural gas and liquefied natural gas are taxed at the rate of two percent (2%) notwithstanding the otherwise applicable subparagraph structure.
Excise tax on indigenous petroleum: rate, timing, and definitions
- Section 151(a)(4) imposes a three percent (3%) tax on indigenous petroleum.
- The tax base is the fair international market price of indigenous petroleum.
- The tax attaches on the first taxable sale, barter, exchange or similar transaction.
- The tax must be paid by the buyer or purchaser within 15 days from the date of actual or constructive delivery.
- Section 151(a)(4) defines key terms:
- “First taxable sale, barter, exchange or similar transaction” means transfer of indigenous petroleum in its original state to a first taxable transferee.
- “Fair international market price” is determined in consultation with an appropriate government agency.
- “Indigenous petroleum” includes locally extracted mineral oil, hydrocarbon gas, bitumen, crude asphalt, mineral gas and all other similar or naturally associated substances with the exception of coal, peat, bituminous shale and/or stratified mineral deposits.
Transitory treatment for petroleum products already assessed
- Section 4 provides a transitory rule for refined and manufactured petroleum products:
- Products produced from crude oil and/or indigenous petroleum on which the ten percent (10%) ad valorem basic duty and the Ninety-five centavos (P0.95) special levy under Harmonized System Heading No. 27.09 of the Tariff and Customs Code of the Philippines, as amended, or the fifteen percent (15%) tax under Section 151(a)(4) have been paid before the effectivity of the Act.
- Products covered by the transitory rule are those:
- That are removed from the place of production or released from custom’s custody, as the case may be, on or after the Act’s effectivity.
- Covered products must not be subject to the specific tax under Section 1 but must instead be subject to the specific tax rates under Section 145 of the National Internal Revenue Code, as amended, prior to this Act.
Government rule-making, repeal/consistency, and separability
- Section 6 directs the Secretary of Finance, upon the recommendation of the Commissioner of Internal Revenue, to promulgate and publish the necessary rules and regulations for effective implementation of the Act.
- Section 7 repeals or modifies inconsistent issuances:
- All laws, decrees, executive orders, rules and regulations, and other issuances or parts thereof that are inconsistent with the Act are repealed or modified accordingly.
- Section 5 provides separability:
- If any provision is declared unconstitutional and its application to any person, circumstance, or transaction is held invalid, the validity of remaining provisions or the applicability of such provision to other persons, circumstances, or transactions is not affected.