October 10, 2019

BIR RULING NO. 585-19

Sec. 57, 1997 Tax Code; 000-00

Hon. Josue S. Gaverza, Jr.
Assistant Secretary for Financial Management/
Chairperson, DND Proper Bids and Awards Committee
Department of National Defense
DND Building, Camp General Emilio Aguinaldo
Quezon City 1110
Dear Asec. Gaverza :
This refers to your letter dated 16 May 2019 requesting, in effect, for a
clarificatory ruling on the claim of Petron Corporation (PETRON) that
purchase of their e-Fuel Cards is not subject to withholding tax consistent
with the provisions of Revenue Regulations (RR) No. 2-98, as amended.
Background:
1. The ongoing procurement of e-Fuel Cards is a requirement of the
Task Force Balik-Loob Program of the Department of National Defense
(DND).
2. The Petron e-Fuel Card is a means by which the customer may
electronically store points for use in purchasing fuels at all participating
Petron Service Stations. The value stored in these cards is what the
customer pre-pay for. All purchases made using the card are applied to the
full extent that this stored value will allow. All purchases through the Petron
e-Fuel Card actually happen at Petron's establishments. 1
3. Petron e-Fuel Card
a. The Petron e-Fuel Card is a stored-value (prepaid) card that
operates on an IT infrastructure developed by the Bank of the
Philippine Islands (BPI).
b. It provides for a fully electronic means by which to load
funds, validate authenticity and settle merchant transactions.
c. Purchases through the Petron e-Fuel Card are accepted at
currently over 1,200 Petron Service Stations that are
equipped with the same BPI Point-Of-Sale (POS) terminals
used in transacting other MasterCard and VISA credit cards.
Processing transactions is the SAME as processing purchases
through any other BPI Credit Card.
d. The Petron e-Fuel Card may be used by the card holder
(customer) to purchase fuels at participating Petron stations
nationwide. Petron provides a list of these stations and
displays signs at establishments where the card is honored.
e. The value loaded into the Petron e-Fuel Card is not
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 convertible to cash. The cards and card values are not
replaceable or transferrable when damaged or lost.
f. The card may be used several times within its validity period
until the value loaded into it is fully depleted. The card holder
may reload value into the card using BPI or BPI Family Bank
Express Teller accounts thru various BPI channels. Inquiries
on the remaining value stored on the card may be
determined through BPI's phone banking facility. 89-100
(Metro Manila), domestic toll-free 1-800-188-89100 (available
to PLDT subscribers), or 63+2+89+10000 for mobile phone
and international access.
g. Petron e-Fuel Cards have a maximum validity date of five (5)
years.
h. Subject to prior arrangements, minimum card values and
other conditions with Petron, partnering brands may be
printed on the card on one color print (black ink only).
4. Ordering, Loading and Issuing Petron e-Fuel Card
a. The customer sends a voucher to Petron indicating the
number of Petron e-Fuel Cards and the desired value in
Philippine Currency to be loaded in each one of them.
b. Petron's Cards Business Group issues a Statement of Account
indicating details on the payment to be made and the bank
account number in which to deposit it.
c. The customer deposits the payment for the invoiced amount
payable to Petron Corporation e-Fuel Card at any branch of
the BPI.
d. Upon Petron's confirmation of receipt of customer's payment,
Petron loads requested monetary values into the cards.
e. Petron e-Fuel Cards shall be issued within 5 working days
from receipt of full payment. For check payments, the check
clearing date shall be recognized as day one (1) and another
five (5) working days for co-branded cards which translates to
a total of ten (10) working days.
5. Using Petron e-Fuel Card Cards
a. The card holder presents his Petron e-Fuel Card at any
participating Petron station and declares the value of the
product that he wishes to purchase.
b. Petron establishment's service staff swipes the card through
the BPI POS terminal and keys in the customer's requested
transaction value and dials up for an approval.
c. Petron establishment's service staff serves the card holder's
purchase and issues a receipt.
d. Card balance can be inquired through BPI's phone banking or
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 at participating stations.
e. Cards can be reloaded. Steps are indicated on the card
carrier.
In reply, please be informed that the e-Fuel Cards which PETRON
issues are mere tools to facilitate the purchase of fuel at the card holder's
preferred retail stations. The payments received by PETRON shall be booked
or recognized as "liability" on PETRON's part. Upon use of the e-Fuel card by
a card holder. PETRON remits the corresponding amount to the retail station
concerned. PETRON does not part with any goods when it issues the e-Fuel
Cards upon which it receives the cash equivalent of the amount of the cards
issued. Neither does it render any service.
On the part of PETRON's customers (i.e., DND), the cards they receive
will be booked as "asset" while the retail station which sells the fuel where
the e-Fuel Card is used by the card holder thereof will recognize income from
such sale.
Since the payments received by PETRON in exchange for the e-Fuel
Cards are not considered as revenue or income arising from the sale of
goods to its customers (i.e., DND) and retail stations, such payments to
PETRON by DND is not subject to withholding tax imposed under Section 57
of the 1997 Tax Code, as amended, and RR No. 2-98, as amended by RR No.
11-2018. However, in the event of non-use of the cards within its validity
period, or in case of breakage or loss of the cards (i.e., 'breakage income'),
PETRON shall recognize income or revenue earned from the sale of said
cards which is subject to ordinary corporate income tax.
This ruling is being issued on the basis of the foregoing facts as
represented. However, if upon investigation, it will be ascertained that the
facts are different, then this ruling shall be considered null and void.
Very truly yours,

(SGD.) CAESAR R. DULAY

Commissioner of Internal Revenue
Footnotes
1. Letter of Petron to Mr. Rolando Fuentes, DND dated 16 November 2018 signed
by AAA, __________, Cards Business Group.

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