CTA orders BIR to refund Petron P389.5M in excise taxes

THE Court of Tax Appeals (CTA) has ordered the Bureau of Internal Revenue (BIR) to refund Petron Corp. P389.49 million in excise taxes, in a ruling that clarifies refund claims on fuel sold to international carriers.

In a 31-page decision, the tax court’s Special Third Division partially granted the consolidated petitions filed by Petron, which originally sought a refund of P586.96 million.

The court ruled that Petron is entitled to the refund under Section 135 of the National Internal Revenue Code (NIRC), which exempts petroleum products sold to international carriers for use outside the Philippines and to entities exempt under existing laws or international agreements.

The case involved two consolidated petitions covering fuel sales from January to June 2020 and July to December 2020. The Commissioner of Internal Revenue argued that the exemption under Section 135 applies only to buyers, not to sellers such as Petron, but the CTA rejected this position.

“The Petitions for Review are partially granted,” the ruling read.

“Accordingly, respondent [commissioner of internal revenue] is ordered to refund in favor of petitioner in the total amount of P389,493,496, representing petitioner’s erroneously paid excise taxes for its imported and locally-produced Jet A-1 fuel for the periods from Jan. 1, 2020 to June 30, 2020, and from July 1, 2020 to Dec. 31, 2020, which were subsequently sold and delivered to various international carriers and tax-exempt entities,” it added.

Jet A-1 is a kerosene-based fuel used in turbine engines and is the standard fuel for commercial aviation.

The decision, penned by Associate Justice Marian Ivy M. Reyes-Fajardo, said “the tax exemption under Section 135 must correspondingly benefit the one who actually bears the liability to pay the same (i.e., the importers/manufacturers of petroleum products sold to international carriers, among others), and not the one who simply bears the economic burden thereof.”

The CTA said Petron filed its administrative and judicial claims within the required two-year prescriptive period.

However, the court disallowed P197.47 million of the claim due to insufficient documentation, unsupported delivery receipts, and instances where fuel withdrawals were made before the earliest official release date.

In clarifying the tax treatment, the court said international carriers “do not manufacture or import petroleum products and hence, are not statutory taxpayers to which the exemption under Section 135 could pertain.”

It added that carriers “merely bear the tax burden when the costs therefor are passed on to them by the actual manufacturers or importers,” which remains a “contractual affair between the parties” and does not affect the statutory tax liability.

The court ruled that Petron “as the statutory taxpayer can claim a refund under Section 135 of the NIRC for the sale of its imported and locally manufactured Jet A-1 fuel.” It ordered the BIR to issue the refund or a tax credit certificate for the approved amount.

Petron reported an 84% increase in net income to P15.6 billion for 2025, supported by steady domestic volume growth, improved refinery performance, and lower operating costs.

Revenues fell by 7% to P810 billion from P868 billion in 2024, which the company attributed to weaker global oil prices.

The company’s operations in the Philippines and Malaysia posted a 3% increase in total volumes to 113.4 million barrels.

Petron said it maintained its leadership in the domestic market despite competition.

In Malaysia, volumes were largely unchanged due to softer demand following adjustments to the government-regulated fuel pricing system.

The company remained the Philippines’ largest oil player, with a 27.8% market share as of the first half of 2025, based on Department of Energy data.

Petron operates 50 terminals across the region and about 2,700 service stations, with a refining capacity of nearly 270,000 barrels per day. — Erika Mae P. Sinaking