BIR Ruling No. 511-2020

REPUBLICOF THE PHILIPPINES

DEPARTMENT OF FINANCE

BUREAU OF INTERNAL REVENUE

Quezon City

RA 9513;RR 16-05;Secs BIR Ruling No.358-17 BIR Ruling No.078-10 112(A);108(B)7)NIRC VAT-0511-2020 SEP n 9 2020

Industry & Investments Building 385 Sen.Gil J.Puyat Avenue Makati City BOARD OF INVESTMENTS

Attention: Mr. Domingo I. Bagaporo

Director, (IASD)

Gentlemen:

(SURE), for clarification on the tax incentives related to renewable energy projects, to wit: This refers to your letter requesting, on behalf of Solutions Using Renewable Energy, Inc.

Whether the payment for value-added tax (VAT) on importation of capital equipment may be recovered through tax credit; and

2. With regard to its local supply and equipment, how can SURE avail the VAT

its parent company which is not renewable energy registered. exemption when it outsources most of its services including the local procurement to

In reply, please be informed, as follows:

1. Input Taxes Paid on the Importation of Capital Equipment may be Recovered

through Tax Credit or Refund.

Section 108(B)(7) of the Tax Code of 1997, as amended by Republic Act (RA) No. 9337

and implemented by Section 4.108-5 (b)(7) of Revenue Regulations (RR) No. 16-2005, as

amended, provide as follows:

(b) Transactions Subject to Zero Percent (0%) VAT Rate. - The

shall be subject to zero percent (0%) VAT rate: following services performed in the Philippines by VAT-registered persons

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VAT-0511-2020 SEP 0 9 2020

energy, and shall not extend to the sale of services related to the maintenance or operation of plants generating said power." as, but not limited to, biomass, solar, wind, hydropower, geothermal and (7) Sale of power or fuel generated through renewable sources of energy such steam, ocean energy, and other emerging sources using technologies such as fuel cells and hydrogen fuels; Provided, however, that zero-rating shall apply strictly to the sale of power or fuel generated through renewable sources of

(DOE) is entitled to VAT zero rating on its sale of power or fuel generated through renewable the Board of Investments and presumably registered and certified by the Department of Energy sources of energy. (BIR Ruling No. 358-17 dated August 9, 2017) (0%) rate. Thus, it is clear that SURE, being a Renewable Energy (RE) Developer, as endorsed by fuel generated through renewable sources of energy is considered subject to VAT at zero percent Section 4.108-5 (b)(7) of RR No. 16-2005, as amended, expressly state that the sale of power or The afore-cited provisions of Section 108(B)(7) of the Tax Code of 1997, as amended, and

attributable to such zero-rated sales shall be available as tax credit or refund pursuant to Section 112(A) of the Tax Code of 1997, as amended by RA 9337, which provides: its importation of capital equipment and local purchases of goods and services directly related or Furthermore, in view of the zero-rated sales of power or fuel by SURE, any input tax on

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

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

provides that Anent the above, pertinent portion of Section 4.112-1 of RR No. 16-2005, as amended,

"(a) Zero-rated and Effectively Zero-rated Sales of Goods, Properties or Services

be subject of the claim shall exclude the portion of input tax that has been years after the close of the taxable quarter when such sales were made. A"VAT-registered person whose sales of goods, properties or services are zero-rated or effectively zero-rated may apply for the issuance of a tax credit certificate/refund of input tax attributable to such sales. The input tax that may applied against the output tax. The application should be filed within two (2)

VAT-0511-2020 SEP 0 9 2020

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Where the taxpayer is engaged in both zero-rated or effectively zero-rated sales and in taxable (including sales subject to final withholding VAT) or exempt sales of goods, properties or services, and the amount of creditable input tax due or paid cannot be directly and entirely attributed to any one of the transactions, only the proportionate share of input taxes allocated to zero-

a tax credit certificate." rated or effectively zero-rated sales can be claimed for refund or issuance of

Accordingly, the input tax paid by SURE on its importation of capital equipment may be

attributable to the sale of power or fuel generated through renewable sources of energy, which must be filed within two (2) years after the close of the taxable quarter when such sales were made (BIR Ruling No. 078-10 dated September 23, 2010) recovered by applying for the issuance of a tax credit certificate/refund of input taxes directly

2. There is no VAT exemption on the outsourced services and local procurement made

by the parent company of SURE which is not an RE Developer as registered and certified by the DOE.

Act of 2008, provides that: Section 15(g) of Republic Act (RA) No. 9513, otherwise known as "Renewable Energy

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

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generated from renewable sources of energy such as but not limited to. (g)Zero Percent Value-Added Tax Rate. - The sale of fuel or power

emerging energy sources using technologies such as fuel cells and hydrogen biomass, solar, wind, hydropower, geothermal, ocean energy and other

to the National Internal Revenue Code (NIRC) of 1997, as amended by fuels, shall be subject to zero percent (0%) value-added tax (VAT), pursuant

Republic Act No. 9337.

its purchases of local supply of goods, properties and services needed for the All RE Developers shall be entitled to zero-rated value-added tax on

development, construction and installation of its plant facilities.

developing renewable energy sources up to its conversion into power, This provision shall also apply to the whole process of exploring and

VAT-051.1-2020 SEP 0 9 2020

including, but not iimited to, the services performed by subcontractors and/or contractors."

Developers are entitled to VAT zero-rating on their local purchases of goods and services needed for the development, construction and installation of their power plant facilities. It is clear from the afore-quoted provisions of Section 15(g) of RA 9513 that only RE

construction and installation of its plant facilities, SURE cannot avail of the VAT zero-rating with the services and procurement of goods, properties and services needed for the development, regard to those purchases made by its parent company. Considering that SURE outsourced to its parent company, which is not an RE Developer,

Please be guided accordingly.

Very truly yours,

K-1 Commissioner of Internal Revenue esama CAESAR R. DULAY 036578 A

gps(BOI-SURE)