QuestionsQuestions (ERC Resolution NO. 20, S. 2005)
ERC Resolution No. 20, s. 2005 is anchored on Republic Act No. 9337, and it specifically implements Sections 4, 6, 15, and 24 of RA 9337 affecting the electric power industry.
The general VAT rate is 10% of gross receipts, with a provision for the President (upon recommendation of the Secretary of Finance) to raise it to 12% effective January 1, 2006 if specified fiscal conditions are met.
It adopts the NIRC amendment’s expansive definition, expressly including sales of electricity by generation companies, transmission and distribution companies, and services of franchise grantees of electric utilities.
The resolution references that certain electricity-related sales are subject to 0% VAT, including sale of power generated through renewable sources of energy (biomass, solar, wind, hydropower, geothermal, ocean energy, and other emerging sources using specified technologies).
GR shall not include the Energy Tax (Batas Pambansa Blg. 36), Universal Charges under RA 9136, Benefits to Host Communities under Energy Regulation 1-94, and security deposits for metering machines (including interest), with the caveat that when such amounts apply to the consumer’s liability, they become subject to VAT.
The VAT directed herein must be reflected as a separate item in the billing statements, using a format approved by the ERC (with referenced sample annexes).
It provides as a general principle that imposing VAT on the covered electricity transactions replaces the payment of National Franchise Tax, aligning the tax treatment with the RA 9337 amendments.
It provides that such electricity shall be considered accrued as VAT zero-rated, provided it is billed by November 30, 2005.
They remain considered as VAT zero-rated if an inventory of those deferred charges is submitted to the BIR by November 30, 2005.
If purely non-renewable, GR is subject to VAT (10% at implementation). If purely renewable, GR is subject to 0% VAT. If mixed, GR refers to the portion from non-renewable sources, and GC imposes 10% VAT on the current billing based on the prior month’s generation mix, with an annual true-up.
TRANSCO’s GR is the total amount paid by the end-user through DUs for transmission of electricity and related electric services. For ancillary services, TRANSCO imposes VAT on the non-renewable portion of the ancillary services amount for the current period, based on the generation mix used when the ancillary service rate was set.
The VAT billed by DUs on the sale and transmission of electricity is neither part of the DUs’ GR nor their input VAT. The DU must ensure revenue neutrality in its collection, and VAT for the current month’s sale/transmission is billed on the next billing cycle.
VAT on allowable system loss is computed based on the proportionate share of transmission and generation components from non-renewable sources. VAT on system loss above the allowed cap is shouldered by the DU.
The resolution requires: (1) sworn certification of Monthly Generation Mix (non-renewable to total mix) per grid supported by monthly kWh generation sales per plant type; (2) sworn certification of summary of monthly invoices and official receipts issued to DUs, supported by copies per DU; and (3) certificate of VAT remittance from BIR, plus other documents the ERC may require.
It revokes the authority previously granted to all private DUs to collect National Franchise Taxes on their consumers.
The ERC shall perform a confirmatory process on the VAT imposed by the utilities (GCs, TRANSCO, and DUs).