THE Court of Tax Appeals (CTA) has granted a P46-million tax refund to Pilipinas Shell Petroleum Corp. for erroneously paying excise taxes on imported fuel sold to international air carriers.
Imported oil sold to international carriers is exempt from excise taxes.
In the case filed by Pilipinas Shell against the Bureau of Internal Revenue (BIR), the CTA ruled that petroleum products sold to international air carriers, whether of Philippine or foreign registry, are exempt from excise taxes, subject to certain requirements for the exemption to take effect.
The BIR said the exemption from excise taxes is granted by the National Internal Revenue Code (NIRC, or Tax Code) to international air carriers, and that such tax exemption does not extend to manufacturers or importers of petroleum products, such as Pilipinas Shell.
But the CTA said the exemption also applies to Pilipinas Shell because Section 135 of the Tax Code exempts from the excise tax petroleum products sold to international air carriers as long as such sale satisfies certain requirements.
The CTA named the requirements for the application of the exemption: The petroleum products are consumed outside the Philippines; such petroleum products are stored in a bonded storage tank and should be disposed of in accordance with the rules and regulations prescribed by the secretary of finance; and, in case of foreign international air carriers, their country of registry is also exempt from excise or similar taxes on petroleum products sold to Philippine carriers.
In this case, Pilipinas Shell was able to prove that the jet fuel it sold to international carriers complies with the requirements prescribed by the NIRC for the sale of such jet fuel to be exempt from excise taxes.
Pilipinas Shell was able to prove that its clients were international carriers exempt from excise taxes on the sale of petroleum products by presenting, among others, a certificate from the Department of Foreign Affairs of the list of countries, which grant the same reciprocal tax exemptions to Philippine-registered airline carriers, and a certificate from the Civil Aviation Authority of the Philippines, indicating the nationalities and countries of registration of the aircraft to which the jet fuel was sold.
Thus, Pilipinas Shell was granted a tax refund amounting to P46.79 million, representing erroneously paid excise taxes on the sale of jet fuel to international air carriers.