Rationalizing the Withholding Tax Rate on Refined Petroleum Products

Echlate TWENTIETH CONGRESS OF THE ) Offer of the Scramp REPUBLIC OF THE PHILIPPINES ) ) First Regular Session 25 SEP -8 P5:29 SENATE S. No. 1354 RECEIVED BY: Introduced by Senator Bam Aquino AN ACT RATIONALIZING THE WITHHOLDING TAX RATE ON REFINED PETROLEUM PRODUCTS, AMENDING FOR THE PURPOSE SECTIONS 57 OF THE NATIONAL INTERNAL REVENUE CODE OF 1997, AS AMENDED EXPLANATORY NOTE The downstream oil industry plays a critical role in the Philippine economy, powering businesses and fueling the daily lives of millions of Filipinos. Despite this, it remains subject to a one percent (1%) withholding tax on its gross sales, even while operating under narrow profit margins. This has led to an observable and recurring accumulation of unused tax credits, as evidenced by the upward trend in unutilized CWTs in audited financial statements of major players from 2020 to 2023. Due to limited access to their own capital, oil companies are unable to invest in critical infrastructure improvements such as storage facilities, logistics systems, and distribution networks. These upgrades, if pursued, could lead to long-term reductions in fuel costs for the public. More importantly, this mismatch in tax treatment leaves millions, if not billions, of pesos in idle capital, severely constraining cash flow for oil companies and inevitably driving up their operating costs. These higher costs are not absorbed by the industry alone; they are ultimately passed on to Filipino consumers in the form of increased fuel prices. This bill seeks to rationalize the withholding tax rate on refined petroleum products aimed at easing the cash flow constraints faced by oil companies, enabling them to reduce costs passed on to consumers. In turn, more competitive fuel pricing can help lower transportation and production expenses across industries, ultimately easing the cost of essential goods and reducing the economic burden on Filipino households. In view of the foregoing, the approval of this bill is earnestly sought. Ban Aquins

TWENTIETH CONGRESS OF THE ) 25 SEP -8 P5:29 REPUBLIC OF THE PHILIPPINES First Regular Session SENATE RECEIVED BY: S. No. 1354 Introduced by Senator Bam Aquino AN ACT RATIONALIZING THE WITHHOLDING TAX RATE ON REFINED PETROLEUM PRODUCTS, AMENDING FOR THE PURPOSE SECTIONS 57 OF THE NATIONAL INTERNAL REVENUE CODE OF 1997, AS AMENDED Be it enacted by the Senate and the House of Representatives of the Philippines in Congress assembled:

Section 1. Section 57 of the National Internal Revenue Code (NIRC), as amended, is

2 hereby further amended to read as follows: "SEC. 57. Withholding of Tax at Source. - XXX (B) Withholding of Creditable Tax at Source. - The Secretary of Finance may, upon the recommendation of the Commissioner, require the withholding of a tax on the items of income payable to natural or juridical persons, residing in the Philippines, by payor-corporation/persons as provided for by law, at the rate of not more than fifteen percent (15%) thereof, which shall be credited against the income tax liability of the taxpayer for the taxable year. PROVIDED, HOWEVER, THAT THE WITHHOLDING TAX RATE ON INCOME DERIVED FROM THE SALE OF REFINED PETROLEUM PRODUCTS SHALL IN NO CASE EXCEED ONE-TENTH OF ONE PERCENT (0.1%).

1 Sec. 2. Implementing Rules and Regulations. - Within ninety (90) days from the 2 effectivity of this Act, the DOF, in consuitation with the appropriate government 3 agencies, shall promulgate rules and regulations necessary for the effective implementation of this Act. 5 Sec. 3. Separability Clause. - If any provision of this Act is declared unconstitutional 6 or invalid, the other provisions not affected thereby shall remain in full force and 7 effect. 8 Sec. 4. Repealing Clause. - All laws, decrees, orders, rules and regulations, or other issuances or parts thereof inconsistent with the provisions of this Act are hereby repealed and modified accordingly.

Sec. 5. Effectivity. - This Act shall take effect fifteen (15) days after its publication in

the Official Gazette or in a newspaper of general circulation. Approved,