THE BUREAU of Internal Revenue (BIR) has instructed coal producers to withhold the excise tax payable from buyers of coal products such as power generators.
Revenue Memorandum Circular (RMC) 105-2018, dated Dec. 17 and signed by Commissioner Caesar R. Dulay, clarifies procedures for the payment of excise tax on domestically-produced coal.
It authorized coal producers to serve as collecting agents of the excise tax and remitting the collections to the BIR.
The BIR added that the circular was issued for the “ease of collection,” and “for the purposes of control.”
Currently, it is coal producers who pay the excise tax at the place of production before the coal is sold to buyers — who then absorb the tax burden passed on to them. The circular effectively eases the burden for coal producers by allowing them to pay tax only after securing orders.
“The excise tax on coal is a tax levied on the product, rather than on the performance, carrying on or the exercise of an activity, such as mining of coal. The general rule is that the producer is the one liable for the excise tax thereon. However, since the excise tax is attached to the product itself, if the tax is unpaid and possession is transferred to the buyer, the buyer/possessor of the product can be made liable for the excise tax,” the BIR said.
Coal producers are still asserting their excise tax-exempt privilege in coal operating contracts under Presidential Decree 972, which was repealed by the Tax Reform for Acceleration and Inclusion (TRAIN) Act, or Republic Act No. 10963.
BIR Deputy Commissioner Arnel SD. Guballa said in a mobile phone message that the circular just clarifies that the “tax attaches to the product not to the company.”
Semirara Chief Executive Officer Isidro A. Consunji floated a proposal in March that is consistent with the RMC, which was touted as a “win-win” solution for the government and industry.
Section 16 of Presidential Decree 972 issued in 1976 states that domestic coal operators and producers are exempt from all national taxes such as excise and value-added tax, but not income tax.
TRAIN currently subjects both domestic and imported coal to a P50 per metric ton excise tax, up from P10 previously and will rise further to P100 per metric ton in 2019, and P150 in 2020. However, domestically-produced coal is still VAT-exempt.
P&A Grant Thornton’s Tax Advisory & Compliance head Eleanor L. Roque meanwhile said that while the RMC may enhance tax administration, it does not spell out who will be liable for non-compliance.
“Shifting the tax burden to the buyer/possessor and making the producer a collecting agent will hopefully make the tax collection more efficient. It ensures that proper taxes are collected at the point of first sale. Since the producers are merely collecting on behalf of the BIR, we assume that they will be more diligent in collecting and remitting the taxes,” Ms. Roque said in a mobile phone message.
“However, the RMC did not mention the penalties for the producer who fails to collect the tax. It would have been better if the RMC clearly stated applicable penalties for failure for collect the taxes to ensure full compliance,” she added. — Elijah Joseph C. Tubayan

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