BIR Ruling No. 320-2020

REPUBLICOFTHE PHILIPPINES

DEPARTMENT OF FINANCE

BUREAU OF INTERNAL REVENUE

Quezon City

RA No.9513 BIR Ruling No.078-10 BIR Ruling No.358-17 BIR Ruling No.1299-18 BIR Ruling No.751-18 OT-ULU-ZZ

OT

Makati City 1226 REYES TACANDONG & CO Citibank Tower. 8741 Paseo de Roxas

Attention: Atty. William Benson S. Gan Tax Services

Gentlemen:

Section 15(g) of Republic Act (RA) No. 9513, otherwise known as, the Renewable Energy Act Energy (DOE)-registered Renewable Energy (RE)Developer, is entitled to value-added tax (VAT) of 2008 man Geothermal Inc.(the Company) for confirmation that the Company, a Department of zero-rating on its purchases of local supply of goods, properties and services needed for the orocess of exploring and developing renewable energy sources up to its conversion into power. development, construction an installation of its various plant facilities, which includes the whole nciuding but not limited to the services performed by subcontractors and contractors, pursuant to This refers to your letter dated August 3, 2018 requesting on behalf of your client, Bac-

Background:

of Internal Revenue(BIR)TIN Corner Meralco Avenue, Ortigas Center, Pasig City. The Company is registered with the Securities Republic of the Philippines with registered address at One Corporate Centre, Julia Vargas Avenue nd Exchange Commission (SEC) with Company Registration No. The Company is a domestic corporation duly organized and existing under the laws of the and with Bureau

are as follows: The primary purposes of the Company, as stated in its Amended Articles of Incorporation.

ether things and devices, to acquire and hold water and flowage rights, and to acquire, lease, hold, occupy or use land rights-of-way and easement therein.' lighting and power purposes and whole-selling the electric power to power contracts either or alone or jointly with other companies or persons for the purposes of carrying out all businesses under which this corporation is organized; to acquire build,construct,own.maintain,and operate all necessary and convenient buildings structures, dows, machinery, sub-stations, transmission lines, poles, wires. and energy derived from any and all forms, types and kinds of energy sources for orporations, public electric utilities and electric cooperatives to enter into -To carry on the general business of generating, transmitting, and/or distributing

VAT zero rating - Sec. 15(g) RA 95 13 Bac-man Geothermal, Inc. OT- JUNE

geothermal energy. The Company uses the steam emanating from geothermal wells in order to operated, and maintained by the Company using the said geothermal steam. exploration, development, generation and sale of energy from renewable sources, such as generate electricity. The Company sells electric energy generated by the power plants owned. Pursuant to its primary purposes, the Company, as an RE Developer, is engaged in the

exploration and development of renewable energy sources up to their conversion into electric subcontractors for the (i) development, construction, and installation of its plant facilities, and (ii) purchases goods, services, and properties from various local suppliers, contractors and power. In the regular course of its operations and business as an RE Developer, the Company

its Implementing Rules and Regulations, summarized as follows: (BOI) in respect of the RE activity in accordance with the provisions of RA No.9513,as well as The Company is a registered RE Developer with the BIR, DOE and Board of Investments

TIN Site DOE Certificates of BOI Cert.of Tyne of Registered

Sorsogon/ Bacon. Manito Albay Registration (COR) (issued on May 8, 2012 No. Registration dated Feb. COR No. 14,2013 Developer of Bac-Man Plant Compiex(130 Activity under BOI Renewable Energy Geothermal Power MW

that the Company is in compliance with its obligations under the said contract. ITH) incentives of the Company's Bacman Geothermal Power Plants under the Geothermal Operating Contract (GOC) No. The DOE. in its letter dated February 2.2018 certified the availment of income tax holiday that the aforesaid GOC is valid and subsisting and

In reply thereto, please be informed that Section 15 (g) of RA No. 9513, provides, to wit:

systems, in proportion to and to the extent of the RE component, for both power and non-power appiications, as duly certified by the DOE, in consultation with the BOI, shall be entitled to the following incentives: Activities. -RE Developers of renewable energy facilities, including hybrid SEC.15.Incentives for Renewabie Energy Projectsand

XXX XXX XXX

purchases of local supply of goods. properties and services needed for the development, construction and installation of its plant facilities. All RE Developers shall be entitled to zero-rated vaiue added tax on its

including but not limited to the services performed by subcontractors and/or contractors."(Underscoring ours) developing renewable energy sources up to its conversion into power. This provision shall also apply to the whole process of exploring and

VAT zero rating -Sec. 15(g) RA 9513 Bac-man Geothermal. Inc. r OT-320-2 SUN13W

VAT on their local purchases of goods, properties and services needed for the development. construction and installation of their power plant facilities. Under said law, the local purchases of goods, properties and services by RE Developers are subject to zero percent (0%) VAT provided that these are needed for the development, construction and instailation of their power plant facilities, including the various transactions pertaining to the whole process of exploration and development of the geothermal source up to its conversion into power, including the services performed by contractors and subcontractors.This is one of the fiscal incentives given by the government to encourage RE Developers including contractors and subcontractors to develop and utilize the renewable energy resources in the country. Clearly, RA No. 9513 intended to exclude RE Developers from the coverage of the 12%

Developer, should not pass on 12% VAT to its purchases of goods, properties and services that will be used by the Company in its development, construction and installation of the geothermal exploring and developing renewable energy sources up to its conversion into power, including but not limited to the services performed by subcontractors and/or contractors. (BIR Ruling Nos. 78- power plant covered by its Geothermal Operating Contract No. GOC Operating Contract No. 2010 dated September 23, 2010 and 358-17 dated August 9, 2017) Accordingly, the suppliers/sellers of goods and services of the Company, it being a RE duly issued by the DOE. This includes the whole process of and Geothermal

installation of the geothermal power plant covered by its Geothermal Operating Contract No.GOC Ruling Nos. 751-18 dated April'30, 2018 and 1299-18 dated October 23, 2018) goods, properties and services shall be limited only to the Company's local purchases that will be used in its development, construction and installation of the geothermal power plant covered by Geothermal Operating Contract No. renewable energy sources up to its conversion into power, including but not limited to the services performed by subcontractors and/or contractors. Likewise. the grant of VAT zero-rating on local purchases is always subject to post audit verification by the Bureau of Internal Revenue (BIR) whether the purchased goods/services were indeed utilized in the development, construction and It must be emphasized, however, that the zero-percent (0%) VAT on local purchases of and Geothermal Operating Contract No. issued by the DOE. This includes the whole process of exploring and developing and Geothermal Operating Contract No. duly issued by the DOE.(BIR

upon investigation, it will be disclosed that the facts are different. then this ruling shall be considered null and void. This ruling is being issued on the basis of the foregoing facts as represented. However. if

Very truly yours.

iaemw

Commissioner of Internal Revenue CAESAR R.DULAY

035401

K-1 gps(bac-man geothermal-RA 9513)