Pursuant to Section 9 of Republic Act No. 8479, otherwise known as the “Downstream Oil Industry Deregulation Act of 1998,” the Board of Investments (BOI) and the Department of Energy (DOE) hereby jointly adopt the following guidelines for the registration and incentives availment of new investments in the Downstream Oil Industry, specifically the activities of refining, storage, marketing and distribution of petroleum products.


SECTION 1.  Coverage.  – These guidelines shall apply to investments in refining, storage, distribution, and marketing of petroleum products.  The following activities shall be eligible for registration:


(a)      Refinery.  – This activity pertains to oil refining, oil processing and oil movement and storage within the refinery.  Oil refining refers to the activity of manufacturing locally petroleum products through distillation, conversion, and treatment of crude oil and other naturally occurring hydrocarbons.  Oil processing is the manufacture of petroleum products with or without the use of the distillation process.  Products resulting from oil refining and/or processing shall conform to the Philippine National Standards (PNS).  Oil movement and storage cover receiving/discharging and storing petroleum within the refinery intended for refining and processing and eventual distribution purposes.


(b)      Storage.  – This activity pertains to the business of receiving/discharging and storing petroleum crudes and/or products of others for compensation or profit.  This shall include fuels transshipment or terminalling (pertains to the last point prior to distribution).


(c)       Distribution.  – Refers to bunkering fuels shipping and transport.


1.       Bunkering covers the activity of selling fuel for direct use by a vessel, usually for water and air transport, through a smaller transport vessel.


2.       Fuels shipping and transport.  – For the fuels to get to the points or areas where they are needed; the downstream oil industry covers the shipping and transport of fuels through land such as tank trucks, lorries and pipeline and water tankers, and barges.


(d)      Marketing.  – Includes retailing of petroleum products, such as fuels retailing; fuels bulk marketing; LPG refilling and marketing.


1.       Fuels retailing refers to the activity of selling petroleum products or fuels in retail, generally directed to the end users, through dispensing pumps in gasoline stations or in packaged containers such as drums for the liquid fuels or metal cylinders for LPG.  This will include the establishment and operation of gasoline stations and LPG retailing.


2.       Fuels bulk marketing refers to the activity of selling petroleum products or fuels in wholesale through tank trucks, lorries, tankers, barges or pipelines which may be sourced from one’s own storage facilities.  Investment for this activity shall also include underground tanks and other equipment intended for fuels retailing through outlets such as gasoline stations and LPG outlets.


        A combination involving storage, distribution and marketing activities will be eligible for registration under marketing.


SEC. 2.  Qualifications for Registration.  – Persons with new investments can qualify for registration.  New investments are investments put up or incurred upon the effectivity of the Rules and Regulations Implementing R. A. 8479 on March 13, 1998:


(a)      Refinery.  – The applicant shall submit an endorsement from the Department of Energy (DOE) certifying that the applicant is either a natural or juridical person with new investments.


(b)      Storage, Marketing and Distribution. – The applicant shall submit an endorsement of the Department of Energy certifying that the applicant is a new industry participant with new investments.


In case of gasoline retail stations, except those locating in the Less Developed Areas (LDA) listed in the current Investments Priorities Plan (IPP) under Executive Order No. 226, as amended, the applicant shall in addition to the DOE endorsement, be required to invest an amount equivalent to Ten Million (P 10 M) Pesos as minimum capital requirement, excluding land, or such amount as may be determined jointly by BOI and DOE for augmentation purposes, as the need arises.


SEC. 3.  Incentives Availment.  – The right to any incentive shall be vested in any qualified person, whether natural or juridical, upon the issuance of the Certificate of Registration.


Subject to Section 7 hereof, incentives shall be available for a period of five (5) years from the date of registration except Income Tax Holiday (ITH) which shall be reckoned from the date of commercial operation.


SEC. 4.  Incentives Available.  – A registered person as provided under Section 2 hereof shall be entitled to the following incentives:


(a)      Income Tax Holiday (ITH).  – This shall be applicable to income derived from the activity covered by the registration reckoned five (5) years from date of commercial operation:  Provided, That in case of gasoline retail stations, except those locating in LDAs, the incentive shall be available only to those with minimum capital requirements, excluding land, of Twenty Million (P 20 M) Pesos or such amount as may be determined jointly by BOI and DOE for augmentation purposes, as the need arises.


(b)      Additional deduction for labor expense.  – This consists of an additional deduction from taxable income of fifty percent (50%) of the wages corresponding to the increment in the number of direct labor for skilled and unskilled workers if the activity meets the prescribed ratio of capital equipment to the number of workers set by the BOIProvided, That this additional deduction shall be doubled if the activity is located in Less Developed Areas.


(c)      Duty of three (3) percent and Value Added Tax (VAT) on imported capital equipment.  – Importation(s) of brand new capital equipment, machinery and accompanying spare parts shall be entitled to this incentive subject to the following conditions:


1.      They are not manufactured domestically in sufficient quantity of comparable quality and at reasonable prices;


2.      The equipment are reasonably needed, and will be exclusively used in the registered activity;


3.      Prior BOI Approval is obtained for the importation as endorsed by the DOE.


Special transports equipment such as but not limited to tank trucks/lorries may be imported with incentives subject to land transportation operation requirements:


Provided, That importations of tankers and barges must be endorsed by the Maritime Industry Authority (MARINA).  Second-hand tankers and barges may be imported with incentives provided they are less than ten (10) years old.


(d)      Tax credit on domestic capital equipment.  – Tax credit shall be granted on locally fabricated capital equipment.  This shall be equivalent to the difference between the tariff rate and the three percent (3%) duty imposed on the imported counterpart.


Applications for tax credit shall be filed with the Department of Finance (DOF) within one (1) year from delivery date.


(e)      Unrestricted use of consigned equipment.  – Capital equipment consigned to any registered person shall not be restricted as to period of use of such equipment subject to the filing of the appropriate re-export bond:  Provided, That such consigned equipment shall be for the exclusive use of the registered activity.


(f)       Exemption from the taxes and duties on imported spare parts.  – Importation of required supplies and spare parts for consigned equipment of those imported with incentives by any registered person with a bonded manufacturing warehouse shall be exempt from customs duties and national internal revenue taxes payable thereon upon compliance with the following requirements:


1.       At least seventy (70%) percent of production is exported;


2.       Such spare parts and supplies are not locally available at reasonable prices, sufficient quantity and comparable quality;


3.       All such spare parts shall be used only in the bonded manufacturing warehouse of the registered enterprise under such requirements as the Bureau of Customs may impose.


(g)      Exemption from real property tax on production or machinery.  – BOI certification to the appropriate Local Government Unit will be issued stating therein the fact of the applicant’s registration with the BOI.


(h)      Exemption from contractor’s tax.  – BOI certification to the Bureau of Internal Revenue (BIR) will be issued stating therein the fact of the applicant’s registration with the BOI.


(i)       Wharfage dues and export tax exemption.  – Any registered person shall be entitled to exemption from wharfage dues and any export tax, impost or fee on the exportation of its registered export products produced by it or bought from a registered export producer qualified to avail itself of exemption from said tax, if it were to export such product directly or through another export producer.


(j)       Employment of foreign nationals.  – Any registered person may be allowed to employ foreign nationals in supervisory, technical or advisory positions for five (5) years from date of registration.


SEC.. 5.  Registration Options.  – New oil industry participants or persons as defined herein which were registered pursuant to E. O. 226, may opt to be governed by the provisions of R. A. 8479.


Enterprises registered with BOI opting to be governed by the provisions of R. A. 8479 shall secure an endorsement from DOE to transfer their registration from E. O. 226 to R. A. 8479 and thereafter surrender their E. O. 226 Certificate of Registration for determination by the Board prior to the issuance of the Certificate of Registration under R. A. 8479:


Provided, however, That the incentives under their new registration shall be restricted to the remaining period, if nay, to ensure that there is no double enjoyment of the same or similar incentives.


SEC. 6.  Procedure for Registration.  – Application for registration under Section 9 of R. A. 8479 shall be governed by the following procedures:


(a)      Application for DOE Endorsement.  – This shall be filed with the Energy Industry Administration Bureau of the DOE.


1.       DOE endorsement shall include an acknowledgment that the applicant is engaged in the specific activity/sector being applied for, and has complied with the prior notice and reportorial requirements of the DOE as embodied in the Rules and Regulations Implementing R. A. 8479.


2.       An application for DOE endorsement shall be accompanied by a detailed description of the project to be registered, including the list of facilities/equipment for which incentives may be availed of.


3.       Only applications meeting all the DOE requirements will be accepted.


4.       DOE shall evaluate and act on the request within twenty (20) working days from receipt of application.


5.       The applicant or the duly authorized representative shall after the payment of the corresponding fees, be issued the DOE endorsement, together with copies of relevant documents submitted in connection therewith.


(b)      Application for BOI Registration.  – This shall be effected as follows:


1.       Upon receipt of DOE endorsement, an applicant shall be required to accomplish the application form for BOI registration.


2.       Procedures for BOI registration as provided under Executive Order No. 226 and its Implementing Rules and Regulations shall be followed starting from the initial checklisting of all the required documents up to the formal acceptance of the application.


3.       Upon formal acceptance, the application and the accompanying documents shall be forwarded to the BOI Industry Group for evaluation.


4.       The BOI Governing Board shall render its decision within twenty (20) working days after official acceptance of the application.  The decision of the Board on every application for registration as well as the terms and conditions of registration shall be communicated in writing to the applicant.  Where an application for registration is not acted upon by the Board within the said period of time, the same shall be considered automatically approved, without prejudice to the Board imposing the usual normal conditions as well as additional specific terms and conditions.


5.       From date of receipt of notice of the Board action, the applicant shall have thirty (30) calendar days within which to submit its acceptance and comply with the pre-registration requirements, if any.  Failure to accept or comply with the requirements within the said period may be construed as a rejection of the proposed registration or abandonment of the project and Board approval will be accordingly withdrawn.


6.       The Certificate of Registration shall be issued upon payment of registration fee and submission of all the pre-registration requirements imposed by the Board.


SEC. 7.  Transitory Provisions.  – Enterprises eligible for registration under these guidelines that have undertaken initial business operation or commercial operation prior to effectivity shall upon evaluation and approval of the BOI be issued BOI Certificate of Registration effective as of date of DOE’s preliminary endorsement made prior to the issuance of these guidelines:  Provided, That said enterprises comply with the aforestated procedure for registration.


Enterprises eligible for storage, marketing, or distribution which have commenced commercial operation prior to effectivity of the guidelines but after January 1, 1994 may apply for DOE’s preliminary endorsement and subsequent BOI registration provided that the Certificate of Registration shall be effective upon DOE endorsement which incentive shall be restricted to the remaining unavailed period, if any.


SEC. 8.  Effectivity.  – These Guidelines shall take effect immediately upon publication in a newspaper of general circulation.


Issued in Makati this 10th day of December 1998








Department of Energy

Department of Trade & Industry


Chairman, Board of Investments


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