REVENUE MEMORANDUM CIRCULAR NO. 66-2013 issued on October 1, 2013 circularizes the revocation of BIR Ruling No. 11-07 dated 31 May 2007 granting Value-Added Tax (VAT) exemption to the National Transmission Corporation (TransCo) in the light of the issuance of Revenue Memorandum Circular (RMC) No. 11-2012 [Tax Consequences of Power Sector Assets and Liabilities Management Corporation (PSALM) Transactions].

     BIR Ruling No. 11-07 confirmed that TransCo is not subject to VAT on the disposal of the sub-transmission assets. RMC No. 11-2012, on the other hand, clarifies that the sale by PSALM of the NPC generation assets and other real properties to winning bidders is subject to VAT.

     In the light of the said clarifications, BIR Ruling No. 11-07 is REVOKED in so far as it is inconsistent with the provisions of the RMC.

     The revocation and nullification of BIR Ruling No.11-07 is anchored on the enactment of Republic Act No. 9337 on July 1, 2005, particularly Section 6 which provided for the amendment of Section 108 (Value-Added Tax on Sale of Services and Use or Lease of Properties) which placed the electric power industry in the VAT System. The amendment included the sale of electricity by generation companies, transmission and distribution companies, to sales subject to VAT. Moreover, Revenue Regulations (RR) No. 16-2005 was accordingly amended by RR No. 4-2007 and subjected the sale of real properties not primarily held for sale or for lease, but used in business, to VAT. Thus, the sale or disposition of sub-transmission assets by PSALM is subject to VAT.

     The Large Taxpayers Service is ordered to conduct an audit and investigation in order to ascertain the taxes due on the instant transaction.