RMC No. 59-2005: Clarifies the tax treatment of petroleum products sold to international marine vessels

Key points

1. Section 135 exemptions. Petroleum products sold to international carriers for use or consumption outside the Philippines (stored in a bonded storage tank and disposed of per Secretary of Finance rules), to exempt entities under tax treaties and international agreements, and to entities exempt by law from direct and indirect taxes are exempt from excise tax. For treaty entities and foreign carriers, the carrier’s or entity’s country must exempt similar products sold to Philippine carriers, entities or agencies.
2. Conditional exemption. Removals for delivery to international marine vessels are not absolute exemptions. They are conditionally tax-exempt removals subject to administrative requirements that prevent tax leakage from diversion.
3. Products and sale. Covered products are limited to bunker fuel, special fuel oils and diesel fuel used by the vessels for their own consumption outside the Philippines. The excise tax must not be billed or passed on to the vessel. Sale may be direct or through an oil broker, and other intermediaries qualify only if limited to a broker’s role and compliant with the Circular.
4. Source and country of registry. The vessel must use the products exclusively outside the Philippines, and its country of registry must exempt similar products sold to Philippine-registered international marine vessels. The products come entirely from the oil refinery or BIR-bonded tanks and are delivered directly to the vessel.
5. Notification and documents. The BIR is informed of each transaction, or series for an identified vessel, before any withdrawal, or within twenty-four hours of delivery in emergencies. The seller submits the supply invoice and nomination letter or purchase order, and a Bureau of Customs certification that the buyer is an international marine vessel. The vessel must depart a Philippine port directly to a foreign port without docking at any other Philippine port.
6. Records and delivery proof. Transfers are recorded in the Official Register Book with a separate subsidiary ledger, with stock on a First-in-First-out basis. Each removal needs a Withdrawal Certificate attested by the Revenue Officer on Premise and marked “EXEMPT SALE TO INTERNATIONAL MARINE VESSEL UNDER SECTION 135”. The invoice names the vessel as buyer, and the vessel’s master or captain issues a delivery certificate with the Manifest attached.

Who is affected

• Oil refiners and oil companies selling to international marine vessels
• International marine vessels

Deadlines and effectivity

• Issued October 24, 2005
• Emergency delivery notice within twenty-four hours