SC: Malampaya contractors’ income taxes part of government share

THE Supreme Court (SC) has ruled that the income taxes of private contractors in the Malampaya natural gas project are included in the government’s 60% share of the project’s net proceeds, effectively reversing a Commission on Audit (CoA) finding that flagged over P53 billion in alleged underpaid taxes.

- — Chloe Mari A. Hufana

In a decision dated July 30, 2025, the Court resolved the dispute between Shell Philippines Exploration B.V., Chevron Malampaya LLC, and PNOC Exploration Corp. and the CoA in favor of the contractors.

The SC held that under Presidential Decree (PD) No. 87, or the Oil Exploration and Development Act, income taxes paid by or on behalf of petroleum contractors form part of the government’s guaranteed 60% share of net proceeds from petroleum operations.

It noted that the law aims to encourage private investment by allowing the state to assume contractors’ income tax obligations.

This policy is reinforced by Presidential Decree Nos. 1206 and 1459, which affirm that the government's share encompasses all applicable taxes.

The Court said that the tax assumption clause under the Malampaya contract does not constitute a tax exemption.