REVENUE MEMORANDUM CIRCULAR NO. 116-2024 issued on October 18, 2024, clarifies the provisions of Republic Act (RA) No. 11976 (Ease of Paying Taxes Act), applicable to the Power Industry.

For sale of services, including the sale of power, gross sales of Distribution Utility (DUs) and Electric Cooperatives (ECs) shall exclude the Value-Added Tax (VAT) and those amounts earmarked for payment to third (3rd) party or received as reimbursement for payment on behalf of another, which do not redound to the benefit of the seller as provided under relevant laws, rules or regulations.

The DUs and ECs shall issue an invoice to the customers, which shall include the sale and transmission of electricity and ancillary services, including the VAT thereon of the Generation Companies (GenCos) and Transmission Companies (e.g. National Grid Corporation of the Philippines). However, the DUs and ECs shall not claim any Input Tax from these. The proper claimant of Input Tax shall be the customers engaged in business based on the invoice to be issued by DUs/ECs.

The amount invoiced by the GenCos and Transmission Companies, which was included in the invoice issued by the DUs and ECs to the customers, including the VAT charges thereon, shall be the basis of Income Tax and VAT liabilities of the GenCos and Transmission Companies.

The pass-through charges of the Retail Electricity Supplier (RES) for the sale of power are the transmission and distribution charges. The RES shall not claim any input tax on the passthrough charges invoiced to the customers.

The following mandated government charges shall not be subject to Output Tax and Creditable Withholding Tax on VAT and Income:

a. Energy Tax under Batas Pambansa Blg. 36;

b. Universal Charges under Sec. 34 of RA No. 9136 (EPIRA);

c. Benefits to Host Communities under Sec. 66 of RA No. 9136 (EPIRA) and DOE Energy Regulations No. 1-94;

d. Feed-in Tariff Allowance (FIT-ALL) under ERC Res. 24, Series of 2013;

e. National and Local Franchise Taxes under Section 9 of RA No. 9511 and Art. Ill of ERC Res. No. 02, Series of 2021, respectively; and

f. Real Property Tax (RPT) under Art. Il of ERC Res. No. 02, Series of 2021.

The amount of 5% creditable VAT withheld by the government customers which was computed based on the total invoiced amount, including pass through charges, shall be claimed as creditable VAT as evidenced by BIR Form No. 2307 in the VAT Returns of the DUs and ECs who issued the invoice on the sale of electricity.

The amount of 2% tax withheld by customers engaged in which was computed based on the total invoiced amount, including pass through charges, shall be claimed as creditable Withholding Tax as evidenced by BIR Form No. 2307 in the Income Tax Return of the DUs, ECs and RES who issued the invoice on the sale of electricity.

Initially, the GenCos and Transmission Companies will issue an invoice to the DUs, ECs, and RES for the whole amount of the generation fees and transmission fees, respectively, including the VAT thereon for the billing period.

The DUs, ECs and RES shall provide the certification of zero-rated/exempt transactions to the GenCos and Transmission Companies on or before the 5th day of the month following the invoice period. The GenCos and Transmission Companies will then issue the applicable adjustment documents (i.e. Debit Memo/Note; Credit Memo/Note; Journal Voucher; or Negative Invoice), which may be generated from their Computerized Accounting System or prepared manually to adjust the Output Tax liability charged on the zero rated and exempt transactions considering that the output VAT on such was already included in the invoice issued by the GenCos and Transmission Companies.

A negative VAT invoice issued by GenCos and Transmission Companies reflects the negative adjustment on the Output Tax initially charged. Said negative VAT invoice or other adjustment documents issued should indicate the original invoice number of the invoice/transactions being adjusted.

All payments by DUs, ECs and RES to the GenCos and Transmission Companies pertaining to generation, transmission and other VATable charges shall be subject to VAT; hence, payment shall include VAT thereon.

GenCos and Transmission Companies shall not be liable to the remittance of all outstanding deferred VAT from the effectivity of the Revenue Regulations No. 3-2024 on April 27, 2024. However, as a transitory procedure, the BIR shall require the following:

a. GenCos and TransCo shall submit (hard copy and soft copy), to the concerned Revenue District Offices (RDOs)/Large Taxpayers (LT) Offices, on or before September 30, 2024, an inventory of the outstanding deferred VAT prior to April 27, 2024, from DUs/ECs and others.

b. DUs and ECs shall remit the deferred VAT, as collected, on behalf of each GenCos and Transmission Companies, using BIR Form No. 0605. The TIN of the GenCos and TransCo shall be clearly indicated on the BIR Form No. 0605. Mark “X” the box for “Others (Specify)” and indicate that the payment is for “DEFERRED VAT – RMC No. ____”.

c. DUs/ECs shall submit (hard copy and soft copy) to the concerned RDOs/LT Offices, on or before the 10th day from the date of remittance of the BIR Form No. 0605, a Summary of the Remittance of Deferred VAT, clearly indicating the name of Supplier, Address, TIN, RDO No., amount of VAT remitted, billing period, name of bank and date of remittance.

d. DUs/ECs shall provide the GenCos and Transmission Companies with copies of the duly filed BIR Form No. 0605, together with the proof of payment within three (3) days from the date of remittance to the BIR. The same shall be the basis of the Generation and Transmission Companies for the issuance of the invoice in accordance with the transitory provision of RR No. 7-2024 and to record the payment of deferred VAT. The unremitted portion of the deferred VAT prior to April 27, 2024, if any, shall remain outstanding until fully collected or closure of the BIR audit of the power industry players.