PHILIPPINE GEOTHERMAL PRODUCTION COMPANY, INC. v. COMMISSIONER OF INTERNAL REVENUE

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY ENBANC PHILIPPINE GEOTHERMAL CTA EB NO. 1894 PRODUCTION COMPANY, INC., (CTA Case No. 9048) P eti tio ner, Present DEL ROSARIO, P.J., CASTANEDA, JR., -versus- UY, FABON-VICTORINO, RINGPIS-LIBAN, MANAHAN, BACORRO-VILLENA, and COMMISSIONER OF INTERNAL MODESTO-SAN PEDRO,JJ. REVENUE, 6::: Promulgated: JUN 2 Respondent. ~ ~t'-~ X~ . X- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -- - - /L :_' RESOLUTION T his resolves Petitioner's "Motion for Reconsideration (RE: Decision dated November 21, 2019)"1 ("Motion for Reconsideration") flied on December 10, 2019, without Respondent's "Opposition" flied on February 20, 2020, seeking to reverse the Decision2 promulgated on November 21, 2019 ("Assailed D ecision") and an amended decision be issued granting Petitioner's claim for refund of its unutilized input value-added tax (''VAT") in the amount o f P hp14,145,000.00. The dispositive portion of the Assailed Decision reads: ''WHEREFORE, premises considered, the instant Petition for Review is DENIE D. The Decision dated 11arch 21, 2018 and the Resolution dated July 10, 2018 of the Second Division in CTA Case No. 9048 are AFFIRMED . 1 Rollo, pp. 66-75. 2 !d., pp. 47-59.

RESOLUTION CfA EB No. 1894 (CfA Case No. 9048) SO ORDERED."3 In his Motion for Reconsideration, Petitioner claims that it should not suffer for the delay in action of the Department of Energy ("DOE") to issue the provisional certification under DOE Department Circular No. DC-2007-07-0011. According to Petitioner, it was able to present with the court a quo a Letter of Intent dated April 04, 2012 (i.e., Exhibit P-12) which showed that it applied for a certificate of registration with the DOE based on the said Department Circular. However, Petitioner was not issued a provisional certification despite its submission of the letter of intent. It is the ministerial duty of the DOE to issue said certificate upon receipt of the letter of intent and its non-issuance thereof should not prejudice Petitioner. Moreover, Petitioner avers that its entidement to the VAT refund emanates from its service contract with the National Power Corporation (NPC). Considering that there is an existing service contract between Petitioner and the government, Petitioner shall be deemed provisionally registered as a Renewable Energy ("RE") developer under the Republic Act No. 95134 or the Renewable Energy Act of 2008, in relation to DOE Department Circular No. DC-2007-07-0011, which registration shall subsist until the issuance of its DOE Certificate of Registration on April 25, 2013. On the other hand, Respondent maintains that Petitioner failed to prove that it was provisionally registered as an RE Developer. We resolve to deny the motion for lack of merit. Review of Petitioner's arguments shows that the same were sufficiendy addressed and passed upon in the Assailed Decision. At any rate, the Court shall reiterate the pertinent portions of said Decision in order to prove its point. As previously discussed in the Assailed Decision, the entidement or enjoyment of the tax incentives under the Renewable Energy Act of 2008 is not automatic. The law requires that the entity claiming said incentive be "duly certified" by the DOE as an RE Developer, that is, it must have a Certificate of Registration5 or at the very least, a provisional certificate of registration6 if it it has an existing service contract with the government. 3 !d., p. 128. 4 Approved December 16, 2008. 5 Department of Energy Circular No. DC2009-05-0008, Section 18(A). 6 Department of Energy Circular No. DC-2007-07-0011, Section 4(b)(ii), paragraph 2.

RESOLUTION CTA EB No. 1894 (CTA Case No. 9048) The registration is a formal requirement for entidement to such incentive. Failure of an enterprise to secure a Certificate of Registration or a provisional one shall amount to forfeiture of said incentive for a particular taxable period. Undisputedly, Petitioner failed to secure the necessary registration for the fourth quarter of 2012. The Certificates of Registration presented by Petitioner both took effect only on April 25, 20137. Prior to this, Petitioner was without any provisional certificate of registration issued in its name. For this reason, Petitioner's sales for the fourth quarter of 2012 cannot qualify under the Renewable Energy Act of 2008 as zero-rated. Instead, they are subjected correcdy to twelve percent (12%) value-added tax (VAT) under the National Internal Revenue Code (NIRC) of 1997, as amended. Additionally, We do not uphold Petitioner's argument that the DOE has a ministerial duty to issue a provisional certificate of registration upon receipt of a letter of intent. Petitioner's insistence that the submission of a letter of intent to the DOE constitutes full compliance with the rule on provisional certification/ registration is belied by the Circular itself. Annex B of Department Circular No. DC-2007-07-0011 prescribes a checklist of requirements for conversion from existing Contracts to RE Contracts, as follows: 1) Letter of Intent from the Developer requesting for the conversion of the existing Contract/Agreement to RE Contract; 2) Accomplishment Report vis-a-vis work and financial program; 3) Updated Work Program; and 4) Such other documents that may be required by the DOE Moreover, the circular provides a flowchart detailing the process of conversion from an existing service contract/agreement to an RE Contract. As shown below, the process starts with the submission of a letter of intent with all necessary documents for approval and issuance of a Certificate of Registration: CONVERSION OF EXISTING SERVICE CONTRACT/AGREEMENT ON RF.. RESOURCES TO R�: CONTRACT UNDER R.A. No. 9513 7 Docket, Exhibits "P-6" to "P-7", pp. 859 and 897.

RESOLUTION erA EB No. 1894 (erA case No. 9048) ( APPLICANT--) w Applicant prepares the . Appllcaut submits .application fni necessary OOcumenta�Y convcmion or Jenor of intt.'l1l with rertniremcnh> us p�".!icribt'd by all nece~ary documents to RliMB the OOE. induding ill:' accompliHbmcnt r<::port vis~i REMB ou.:.knowlcdgll::li receipt vill work and tinancial ofA(Jplicadon and advi.'�!:!~ the commitments and updated applicant of file schedule of work program, Wld taking negotialion into account ~uch filelurs M type of RE rusourc.::, tlud remaining tt:rm or 1XlntJa<.~llagn.-cmenL among clthcrs. lli!MB. with the as&ist.arn:e of RJ~:Mli !)hall reject FinallCialand l..ega1 Service~. the app~icalion and negoti11tcfi with the applicanl the advises the ap~icant wmt:> and conditions nf RE on the grounds for Contrn.ci The negotiation petiotl aha II "r,OI exceed l20 days. rejeclinn. REMB rocomlllQntls apprllval for Hok.ler ofex.isting ~Ollff3Ctl �1 cauvcrsion of c.ontractlagrcemcnt to ag.t'tenie.nl lif,all cotltirlue to operate RE Comracllu the OOE Socrewy ils RB project wtth;n the tema.ining term under the 01d regime. If theRE Contracr I Upon approval by the Secretnry�.- is in the nature of REMB nollfies the applicant of FfAA, th~ the approval and the schedule of l'rc.~idellt s.hall !ligning ofRE Contract award alld execute the the loOE�~~rc~ awa.rds conversion of existing service ; conversion and the parties contract to RE sign the REContract Contract upon recommendation D by the (l()f. OOE issues the Certificate __ _ :_ \.S_e_ cr_e_t_arv of Rcgistlation to RE Once the holder of the Developer upon Effectivity existing service of the RE Ccmtntct contnsct/agreement was issued a DOE DOE Certificate of (A!rtificnte of Registration Registration as Ml k.E Developer, the RE project shall be @PVCmed by R. A. No. 9513 {Act). RE Developer shall contirwe to avaiJ of the incentives except those which have hccn modified or withdrawn by the Act

RESOLUTION CTA EB No. 1894 (CTA Case No. 9048) From all of the foregoing, We find no cogent reason to reverse the Assailed Decision. The VAT on royalty payments to Petitioner's non-resident suppliers in December 2012 amounting to Php14,145,000.00 was not erroneously paid. WHEREFORE, premises considered, Petitioner's "Motion for Reconsideration (RE: Decision dated November 21, 2019)" is DENIED for lack of merit. SO ORDERED. ~.~~ MA. BELEN M. RINGPIS-LIBAN Associate Justice WE CONCUR: Presiding Justice Ji~faA.N..IuTt;O."-Cc..C.A~SeTtA.N.E/DJ~:JR. ERL~P.UY Associate Justice Associate Justice ESPE ~7-~ CATHERINE T. MANAHAN Associate Justice JEAN MARIE