RMC No. 116-2024 — Clarifying the provisions of Republic Act No. 11976, or Otherwise Known as the "Ease of Paying Taxes Act", applicable to the Power Industry Digest | Full Text | Annex A | Annex B | Annex C

BuReAu oFINteRnAl ReVENU G S MANAGEMENT DIVISIO

BUREAU OF INTERNAL REVENUE Repubiic of the Philippines. National Office Building Department of Finance BY admin unit OCT 18 2024 TME.GZA

AUG 2'1 2024

REVENUE MEMORANDUM CIRCULARNO.:4:1 6 - 2 0 2 4

SUBJECT : Clarifying the Provisions of Republic Act No. 11976, or Otherwise

Known as the "Ease of Paying Taxes Act", Applicable to the Power Industry

TO :All Internal Revenue Officers And Others Concerned

This Revenue Memorandum Circular is issued in order to publish and clarify certain provisions of Revenue Regulations (RR) Nos. 3-2024 and 7-2024, implementing the National Internal Revenue Code of 1997 (Tax Code), as amended by Republic Act (RA) No. 11976 or otherwise known as the "Ease of Paying Taxes (EOPT) Act", affecting generation, transmission, and distribution companies, as well as electric cooperatives and retail electricity suppliers.

Q1: What is the tax treatment of the Generation and Transmission charges

including the VAT thereon which are pass through charges of the Distribution Utility (DUs) Companies and Electric Cooperatives (ECs)?

A1: For sale of services, including the sale of power, gross sales of DUs and ECs shall

party or received as reimbursement for payment on behalf of another which do not exclude the value-added tax and those amounts earmarked for payment to third (3d)

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

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VAT charges thereon, shall be the basis of income tax and VAT liabilities of the GenCos and Transmission Companies.

Q2: What are the pass-through charges for the Retail Electricity Supplier (RES)

and how are they treated?

A2: The pass-through charges of the RES for the sale of power are the transmission and

distribution charges.

The RES shall not claim any input tax on the pass-through charges invoiced to the customers.

Q3: Are the government mandated charges subject to Output Tax and

consequently on Creditable Withholding on VAT and Income?

A3: The following mandated government charges shall not be subject to Output Tax and

Creditable Withholding Tax on VAT and Income:

1.Energy Tax under Batas Pambansa Blg. 36; 2.Universal Charges (UC) under Sec. 34 of R.A. No. 9136 (EPIRA); 3. Benefits to Host Communities under Sec. 66 of R.A. 9136 (EPIRA) and DOE

Energy Regulations No. 1-94; 4. Feed-in Tariff Allowance (FIT-ALL) under ERC Res. 24, Series of 2013: 5. National and Local Franchise Taxes under Section 9 of RA No. 9511 and Art. III of ERC Res. No. 02, Series of 2021, respectively; and 6.Real Property Tax (RPT) under Art. II of ERC Res. No. 02, Series of 2021.

Q4: What is the treatment of the 5% creditable VAT withheld by the government

customers?

A4: 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.

Q5: What is the treatment of the 2% income tax withheld by the customers

engaged in business?

A5: The amount of 2% tax withheld by customers engaged in business which was

be claimed as creditable withholding tax as evidenced by BIR Form No. 2307 in the computed based on the total invoiced amount, including pass through charges, shall

Income Tax Return of the DUs, ECs and RES who issued the invoice on the sale of electricity. RUREAU OF INTERNALREVENUE RECORDS MANAGEMENT DIVISION

EU

OCT 18 2024

ADMIN UNIT:3T:ZSA. b 2

Q6: How will the GenCos and Transmission Companies declare the VAT on its

generation and transmission fees, respectively, considering the various types of customers/end-users (i.e. vatable, zero-rated, exempt)?

A6: 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 (Refer to Annex A) 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

included in the invoice issued by the GenCos and Transmission Companies. rated and exempt transactions considering that the output VAT on such was already

Q7: What is a negative VAT invoice?

A7: For purposes of Q6 above, a negative VAT invoice issued by GenCos and

Transmission Companies reflects the negative adjustment on the output tax initially

indicate the original invoice number of the invoice/transactions being adjusted. charged. Said negative VAT invoice or other adjustment documents issued should

Illustration:

billing period April 26, 2024 to May 25, 2024, as shown below: EY RERADs MFANAGRMENRViND GenCo ABC Corporation issued an invoice for the generation fees sold for the TOE

AghQT VAY R*g. TN: 888153-456000 oG 5 e XI CtT OCT 18 2024

Sotd t8 . INVOICE e e.A Addr. ICt ADMN uNit - TME: 1:256 Billing for th period Apnl 26. 2024 to My 25. 2024 (@,413,609.01kWh) 171.11 MOVUNT6.102.

1 5,755,448.76

rx OTAL OAmou? Php 28:070.53

[This is a BR aproed *ystom generoted rd tviy Dei2x160787 Y999998 e itoua 7 IU_CAS_000

Zero-rated/Exempt transactions to ABC Corporation on or before June 5, 2024, as The DU, XYZ Corporation, will then provide ABC Corporation the Certification of

shown below:

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Summary of Zero-Rated and E For the Supply Period of April 26, 2024 to May 25, 2024 (SI No. 200000051) DISTRIBUTION UTILITIES/ELECTRIC COOPERATIVESRES XY Corporation xempt Customers

Nvoice no +i 6t NAME OF CUstONEr ' T ZRO-RATAD 176.571-43 ETR EXEMPt 267.857.14 eguvae 147 : 6

5000164End User 00165 000175End User S000189End Usor 10 Y 0 .. nd User 1- 000.000.006 O Y 000.000-00 000-000.008 000.000.009 + 776,477.86 111.607.14 158.928.57. 107.142.86 sT.i: i59D8 973.802.86 223.214.29 145.535.71 339.285.71 11+11:Y21 40714.29 12.857.14 .7.5.7 3071 A07t G.. 3F . 13

Certified by:

AUTHORIZED REPRESENTATIVE

After which, ABC Corporation will issue a "negative invoice" to reflect the adjustments on VAT, as illustrated below:

Ag VAT Rg. YN: 00012358.000

(in te n for tho20 Addrt Sold to: XYZ.Copo PARTICULAR 2 iicr INVOICE No.7200000066 3 XT o

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TOTAL AMOUNY OUE fora

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hi taaBIR aPovnaY WM000.7 monmoo r:16.2025 ...... Cxarr OCT 18 2024 .

Note: The invoices shown above are for illustrative purposes only. BY: Admin unit" A TMe: RAA Q8: What is the treatment of the payments made by DUs, ECs and RES to GenCos

and Transmission Companies representing generation, transmission and other power related charges?

A8: 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 the VAT thereon.

Q9: Will GenCos and Transmission Companies be liable to the remittance of all

outstanding deferred VAT from DUs and ECs prior to April 27, 2024 or the effectivity of the RR Nos. 3-2024 and 7-2024?

A9: No. GenCos and Transmission Companies shall not be liable to the remittance of all

outstanding deferred VAT from the effectivity of the RR No. 3-2024 on April 27, 2024

However, as a transitory procedure, the BIR shall require the following:

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1. 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. Refer to Annex "B" for the format.

2. 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. 3

3. DUs/ECs shall submit (hard copy and soft copy) to the concerned RDOs/LT Offices, on or before the 1ot day from the date of remittance of the BIR Form

No. 0605, a Summary of the Remittance of Deferred VAT, clearly indicating

billing period, name of bank and date of remittance. Refer to Annex "C" for the the name of Supplier, Address, TIN, RDO No., amount of VAT remitted,

format.

4. 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

invoice in accordance with the transitory provision of RR No. 7-2024 and to basis of the Generation and Transmission Companies for the issuance of the

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.

All other revenue memorandum circulars and rulings inconsistent herewith are hereby amended, modified or repealed accordingly.

All internal revenue officers and employees are hereby enjoined to follow, observe and give this Revenue Memorandum Circular as wide publicity as possible.

This Circular shall take effect immediately.

GP IOFINT ANAGEVENT DIVISION ERNAL REVENUE 3- M J.JR

DCT 18 2024 0 xssioner of Internal Revenue

ADMINUNIT:G:25A F-a IME:

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