Question & AnswerQ&A (ERC Resolution NO. 20, S. 2005)
The main purpose of ERC Resolution No. 20, s. 2005 is to implement the recovery of Value Added Tax (VAT) and other provisions of Republic Act No. 9337 affecting the electric power industry in the Philippines.
A value-added tax equivalent to ten percent (10%) of gross receipts is initially imposed, with the possibility of increase to twelve percent (12%) under certain economic conditions as provided by the President upon recommendation by the Secretary of Finance.
Gross receipts mean the total amount of money or its equivalent representing contract price, compensation, service fee, rental or royalty, including amounts charged for materials supplied with services and deposits and advanced payments received during the taxable quarter for services performed or to be performed for another person, excluding VAT.
Sales of power or fuel generated through renewable sources of energy such as biomass, solar, wind, hydropower, geothermal, ocean energy, and other emerging energy sources using technologies like fuel cells and hydrogen fuels are subject to zero percent (0%) VAT.
The imposition of VAT replaces the payment of the National Franchise Tax by the affected electric utilities.
VAT shall be reflected as a separate item in the billing statements to customers in a format approved by the Energy Regulatory Commission (ERC).
No, penalties including the corresponding VAT imposed on distribution utilities due to their fault or negligence shall not be passed on to the customers.
Such generation rate and foreign exchange rate adjustments are considered VAT zero-rated even if billed and collected after October 31, 2005.
The generation companies (GC) and the National Transmission Corporation (TRANSCO) are responsible for the tax due to the BIR; distribution utilities collect VAT from end-users but must remit it to the concerned GC or TRANSCO accordingly.
Generation companies must submit to the ERC on or before the 10th day of each month: (1) Certification under oath of the monthly generation mix (non-renewable to total mix) per grid with supporting documentation, (2) Certification under oath of the summary of monthly invoices and official receipts issued to distribution utilities, (3) Certificate of VAT remittance from BIR, and (4) Other documents that may be needed by the Commission.