BIR Ruling No. 351-2022

REPUBLICOF THE PHILIPPINES

BUREAU OF INTERNAL REVENUE DEPARTMENT OF FINANCE

Quezo.: City

Republic Act No.9513

BIR Ruling No.0805-29182 2 BIR Ruling No. OT-0320-2020: BIR Ruling No. OT-0290-2020; BIR Ruling No. VAT-0218-2020; VAT JUL 0 5 2022 35

6th Floor, Rockwell Business Center, Tower 3 Ortigas AvenuePasig City Bac-Man Geothermal, Inc. Green Core Geothermal, Inc. Energy Development Corporation EDC Burgos Wind Power Corporation

Attention: Maribel A. Manlapaz Comptroller

Gentlemen:

Act (RA) No. 9513, otherwise known as the Renewable Energy Act of 2008. registered Renewable Energy(RE) Developere entitled to zero percent(0%) value-added tax (VAT) on their purchase of local supply of goods,properties, and services needed during the development, construction,and installation of their plant facilities,and the whole proces of exploration and development of RE sources up to its conversion into power, i.e., the eire development/commercial stage, which includes commercial operations, pursuant to Republic Geotermal,Inc.Energy Development Corporation and ED Burgos Wind Power Corporation (collectively the Companies),for clarification that the Companies, being duly This refers to your request on behalf of Bac-Man Geotherma Ihc., Green Core

renewable energy sources up to its conversion into power, including but not limited to the installation of their power plant facilities and the whole proce s of exploring and developing services performed by subcontractors and contractors. this Office ruled that since the Companies are DOE-certified RE Developers, their suppliers/sellers of goods and services should not pass on to them the 12% VAT on the purchase of such goods and services that are needed for the development, construction, and In BIR Ruling Nos.OT-0320-2020,OT-0290-2020,VAT-0218-2020, and 0805-2019

supplied to the Companies during the commercial operations of their renewable energy (RE) Companies on the basis that the BIR Rulings do not explicitly state that the goods and services projects are VAT zero-rated. Hence, this request. It is represented, however that certain local suppliers charge 12% VAT to the

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

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

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(g)Zero Percent Value-Added Tax Rate.

the development, construction, and installatior of its plant facilities. purchases of local supply of goods, properties and services needed for All RE Developers shail be entitled to zero-raicd value-added tax on its

This provision shall clso apply to the whole process of exploring and developing renewable energy sources up to iis conversion into power including but not limited to, the services performed by subcontractors and/or contractors."(Underlining supplied)

that: In relation thereto, Section of 4 (E) of Revenue Regulations (RR) No. 7-2022 states

of RE facilities in consultation with BOI, including hybrid systems, in proportion to and to the extent of the RE component, for both power and non-power incentives and treatments on the DOE-certified existing and new RE developers PROJECTS AND ACTIVITIES-The following provisions shall govern the tax applications: "SECTION 4.FISCAL INCENTIVES FORRENEWABLE ENERGY

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E Zero Percent Value-Added Tax Rate

process of exploration and deveiopment of RE sources up to its performed by subcontructors and/or contractors shall also subject to zero percent (0%) VAT. installation of the plant facilities of RE Developers, and the whole conversion into power, including,but not limited to, the services On the other hand, the purchase by an RE Developer of local goods properties, and services needed fer the development.construction.ana

contractors. (Underlining supplied) facilities. This includes-the whole process of exploring and developing renewable energy sources up to its conversion into power, including but not limited to the services performed by subcontractors and/or of duly-registered NE developers should not puss on the 12% VAT on the latter's purchases of goods, properties and services that will be used for the development, construction and installation of their power plant Accordingly,local suppliers/sellers of goods, properties, and services

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limited to, the services performed by subcontractors and/or contractors. installation of the power plant facilities including the whole process of exploring and developing renewable energy sources u to its conversion into power - including, but not accord VAT zero-rated status to the local purchase of goods, properties, and services used in all stages of RE development and operations -- from thie development, construction, and It is clear from the afore-quoted provisions that the intention of RA No. 9513 is to

development/commercial stage -- and the VAT zero-rating incentive under Section 15(g) applies to the entirety of the development/commercial stage. which may include commercial operations. The law expressly provides that the incentive shall also apply to the whole process of exploring and deveioping renewable energyources up to its conversion into power. It must RA No. 9513 divides RE Contracts into 2 stages -- pre-development stage and the

Tax Incentives Under the Renewable Energy Act of 2008 and the Policies andGuidelines for the Availment Thereof 0

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be noted that the process of converting renewable sources into power is a continuing process and may continue even during the commercial operations as long as there is a renewable source

be entitled to VAT zero-rating. This view is in line with the obiective of RA No.9513 to and local capabilities in the use of renewable energy systerns, and promoting its efficient and cost-effective commercial application by providing fiscal and non-fiscal incentives.2 increase the utilization of renewable energy by institutionalizing the development of national being converted into power.Necessarily.local purchases incurred during this stage remains to

under Section 15g) of RA No.9513 applies to the local purchases of goods,properties, and services needed during the development, construction, and installation of plant facilities, and during the whole process of exploration and development of RE sources up to its conversion into power i.e., the entire development/commercial stage, which may include commercial operations. In view of the foregoing,we confirm that the VAT zero-rating granted to the Companies

Moreover, the same Section 15(g) of RA No.9513 provides:

"Section 15.Incentives for Renewable Energy Projects and Activities.

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(g) Zero Percent Value-Added Tax Rate.-The sale of fuel or power as amended by Republic Act No.9337. emerging energy sources using technologies such as fuel cells and hydrogen fuels, shall be subject tro percent (0%) value-added tax biomass, solar, wind, hydropower, geothermal, ocean er;ergy and other VAT),pursuant to the National Internal Revenuie Code (NIRC) of 1997 generated from renewable sources of energy such as, but not liriited to.

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of 1997, as amended. provides: Relative theretc, Section 108 (B)(7) of the National Internal Revenue Code (Tax Code)

Properties. "SEC.108. Value-Added Tax on Sale of Services and Use or Lease of

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(B) Transactions Subject to Zero Percent (0%) Rate - be subject to zero percent (0%) rate. services performed in the Philippines by VAT-registered persons shall - The following

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(7) Sale of power or fuel generated through renewable sources of energy sources using technologies such as fuel cells and hydrogen fuels. energy such as, but not limited to, biomass, solar, wind. hydropower, geothermal ocean energy, and other emerging

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sources of energy is subject to zero percent VA Based on the above provisions, the sal: of power or fuel generated through renewable Thus, any input VAT paid or attributable to 2 Section 2 (b) of RA No. 9513

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YAYI 351-2022

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such zero-rated sales, to the extent that such input tax has not been applied against output tax. may be claimed for refund under Section 112 of the Tax Code of 1997.as amended,towit

"SEC. 112. Refunds or Tax Credits of Input Tax.

(A) Zero-rated or Effectively Zero-rated Sales.Any VAT-registered person, whose sales are zero-ratedor effectively z:ro-rated may, within two (2) years after the close of the taxable quarner when the sales were made, apply for the issuance of a tax credit certificate or refund of creditable input tax aue or paid attributable to such sales, except transitional input tax, to the extent that such input tax has not been applied against output tax: ....

facilities and the whole process of expioration and development of RE sources up to its commercial operations. subject to post-audit verification by the BIR whether the purchased goods, properties, and conversion into power, i.e., the entire uevelopment/commercial stage which may include 2020, and 0805-2019, and as will be clarified herein, the grant of VAT zero-rating shall be services were indeed utilized in the development, construction, and installation of power plant Finally, as mentioned in BIR Ruling Nos.OT-0320-2020, OT-0290-2020, VAT-0218-

if upon investigation, it will be disciosed 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,

ery truly yours.

K- LARRYM.BARCELO AssistAnt Commissioner RIDAO No.2-2020 Legal Service 00008644

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