VAT Rate and Zero Percent VAT Transactions
- VAT generally levied at 10% on gross receipts.
- Zero percent (0%) VAT rate applies to specific services including sales of power generated from renewable energy sources such as biomass, solar, wind, hydropower, geothermal, ocean energy, and other emerging technologies.
Exemption and Repealed Provisions
- Franchise grantees of electricity exempt from franchise taxes.
- Prior exemptions for certain entities like the National Power Corporation and generation companies removed, making these subject to VAT as per Title IV of the NIRC.
Authority and Purpose of the Resolution
- The Energy Regulatory Commission (ERC) exercises authority to regulate rates of electric DUs, NPC, and TRANSCO.
- The resolution implements R.A. No. 9337 provisions on VAT imposition within the electric power industry effective November 1, 2005.
General Principles on VAT Imposition
- VAT imposed on gross receipts of generation companies (GC), transmission company (TRANSCO), and distribution utilities (DUs).
- VAT must be shown as a separate item in billing statements using formats approved by the ERC.
- VAT replaces the National Franchise Tax, which is abolished.
- Exclusions from gross receipts: Energy tax, universal charges, benefits for host communities, security deposits except when passed to consumer.
- Gross receipts shall be net of discounts but gross of penalties.
- Special provisions exist for VAT on sales to government entities, with a 5% final VAT withholding serving both as tax payment and input VAT credit for government.
- Transitional provisions for transactions on or before October 31, 2005, allowing zero-rated VAT treatment under specified conditions.
- Penalties imposed on DUs due to fault or negligence cannot be passed to consumers.
- Billing and VAT remittance procedures involving GC, TRANSCO, and DUs elaborated, emphasizing revenue neutrality for DUs.
VAT Imposition for Generation Companies (GC)
- GC gross receipts include payments received through DUs for electricity and ancillary services.
- VAT imposed at 10% on non-renewable energy portions.
- Electricity generated solely from renewable sources subject to zero percent VAT.
- For mixed energy sources, VAT applies only to non-renewable energy portion.
- Annual true-up required to adjust VAT based on actual energy mix.
VAT Imposition for Transmission Company (TRANSCO)
- Gross receipts include payments for transmission services, ancillary services, metering, and other defined components.
- VAT applies at 10% on non-renewable energy portions of ancillary service charges.
- Ancillary service VAT remitted to respective generation companies.
VAT Imposition for Distribution Utilities (DUs)
- DUs bill customers VAT separately; VAT is not part of DUs' gross receipts or input VAT.
- VAT on system loss calculated on allowed losses; excess loss VAT borne by DUs.
- DUs remit VAT collected for generation and transmission to the respective GCs and TRANSCO.
- DUs’ gross receipts include charges for distribution, metering, supply, subsidies, cross-subsidies, exchange rates, franchise tax, and other approved fees.
Reportorial Requirements
- GCs must submit monthly certifications on generation mix, invoices, receipts, and VAT remittance certificates.
- TRANSCO must submit VAT remittance certificates and other documents as required.
- DUs must provide VAT remittance certificates, certifications on power sources, and comply with additional reporting under relevant ERC guidelines.
Revocation of Authority to Collect Franchise Tax
- ERC revokes prior authority granted to private DUs to collect National Franchise Taxes from consumers following VAT imposition.
Distribution and Effectivity
- Resolution directs distribution of copies to all electric utilities and relevant government agencies for compliance.
- The Resolution takes immediate effect from November 7, 2005, implementing the VAT provisions affecting the electric power industry effectively starting November 1, 2005.