CREATE Act to relax taxation scheme for oil refiners

Published February 9, 2021, 1:44 PM

by Myrna M. Velasco

The Congress-ratified Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act will relax the ‘tax regime’ to be enforced for operators of oil refining facilities in the country.

With that re-calibrated taxation policy in the CREATE measure, it was noted that the perturbed state of the country’s lone refinery owned by Petron Corporation may still be saved from feared total shutdown.

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The CREATE Act promulgated by the bicameral committee of Congress stipulated that “crude oil that is intended to be refined at local refinery, including the volumes that are lost and not converted to petroleum products when the crude oil actually undergoes the refining process, shall be exempt from payment of applicable duties and taxes upon importation.”

The proposed law has already been submitted to Malacanang for President Rodrigo Duterte’s final approval and signature.

It was further provided under the measure that “applicable duties and taxes on petroleum products shall be payable only upon lifting of the petroleum products produced from the imported crude oil subject to rules and regulations that may be prescribed by the Bureau of Customs and the BIR (Bureau of Internal Revenue) to ensure that crude oil not be lifted from the refinery without payment of appropriate duties and taxes.”

That particular prescription in the CREATE Act is seen as a policy triumph for Petron’s refinery, as the company earlier grumbled on inequitable tax regime it is being subjected to when it comes to taxes levied to it from point of crude importation – whereas, in the case of the finished product importers, they are just taxed when the products are already sold at their pumps.

To save jobs and safeguard the country’s quest for energy security, Petron had recently batted for accreditation as an economic zone locator at the Authority of the Freeport Area of Bataan.

For direct importers of finished petroleum products, the CREATE Act mandates that the overseas-sourced products for resale in the Philippine customs’ and/or in free zones “shall not be entitled to the foregoing tax and duty incentives.” Instead, they shall be subject to taxes imposed under the Customs Modernization and Tariff Act or CMTA.

It was also specified that the product importer can “file for claims for the refund of duties and taxes applicable under the CMTA and this Code (CREATE Act), respectively, for direct or indirect export of petroleum products; and/or other tax-exempt sales under CMTA and other special laws within the period provided therein.”

Additionally, it has been decreed that “the importers who subsequently export fuel, subject to the appropriate rules of the fuel marking program, may apply for a refund of duties and taxes, as applicable under the CMTA and this Code.”