RR No. 2-2026 — Guidelines in the Availment of the Fiscal Incentives Under Section 38 of Republic Act No. 12120, Otherwise Known as the "Philippine Natural Gas Industry Development Act"

REPUBLICOF THE PHILIPPINES

BUREAU OF INTERNAL REVENUE DEPARTMENT OF FINANCE

Bringing In Revenues for Nation-Building National Office Building Quezon City PILIPINAS BAGONG

MAR 05 2026

REVENUE REGULATIONS NO. 0 0 2 - 2 0 2 6

SUBJECT Guidelines in the Availment of the Fiscal Incentives Under Section

38 of Republic Act No.12120,Otherwise Known as the Philippine Natural Gas Industry Development Act

TO All Internal Revenue OfficialsEmployees and Others Concerned

SECTION 1.SCOPE.-Pursuant to Sections 244 and 245 of the National Internal Revenue Code of 1997.as amended(Tax Code.and in accordance with the State's policy to promote natural gas as a safe,efficient,and cost-effective energy source.these Regulations are hereby issued to provide guidelines in the availment of the tax incentives provided under Section 38 of Republic Act (RA No.12120.otherwise known as the Philippine Natural Gas Industry Development Act

terms shall be defined as follows: SECTION 2.DEFINITION OF TERMS.-For purposes of these Regulations,the following

(a Aggregation refers to the procurement of indigenous natural gas.combining it with imported Liquefied Natural Gas,and selling the aggregated gas to gas buyers in the Philippines or abroad, by Participant/s known as aggregators:

(b Ancillary services are those services provided by a generation facility using

indigenous natural gas and/or aggregated gas,which are necessary to support the transmission and distribution of electricity:

c Distribution Utility refers to any electric cooperative, private corporation. government-owned utility or existing local government unit which has an exclusive

Electric Power Industry Reform Act of 2001; franchise to operate a distribution system in accordance with RA No.9136 or the

d Generation Facility refers to a facility for the production of electricity and/or thermal energy such as. but not limited to, steam,hot or cold water

e Indigenous Natural Gas refers to natural gas produced from fields within the territorial jurisdiction of the Republic of the Philippines

f Liquefied Natural Gas refers to natural gas that has been liquefied by cooling at a cryogenic temperature: @RUREAU RF INTERNAN REVENUN NTERNAL REVENUE

S E

BIR National Office Bldg. Senator Miriam Defensor-Santiago Avenue Trunkline: 8981-7000 :8929-7676 Website:www.bir.gov.ph MAR1 Sit2026

BY ADMIN UNIT TIME:10.1OGm

gParticipant refers to a natural or juridical person who engages in the trade of natural

gas either as a supplier. aggregator,bunker trader.or reseller

hPermit refers to an authorization issued by the Department of Energy(DOEfor the

siting.construction.operationandmaintenanceexpansionmodification. rehabilitation, decommissioning, and abandonment of Philippine Downstream Natural Gas Industry (PDNGI Facilities for Own-Use or Third-Party Access (TPA.It shall likewise apply to the accreditation of Participants in the trade of

bunkering.reselling.and export of natural gas.and any other activity related to the natural gas. including but not limited to the purchase, supply aggregation

PDNGI:

i Permit Holder refers to a natural or juridical person who owns the PDNGI Facility

and is granted a permit by the DOE to engage in the siting,construction,operation and maintenance. expansion, modification,rehabilitation, decommissioning, and abandonment of PDNGI Facilities for Own-use or TPA

Philippine Downstream Natural Gas Industry Facility or PDNGI Facility refers to the Liquefied Natural Gas Storage and Regasification Terminal, PDNG Transmission System, and PDNG Distribution System,and other related facilities:

(k) Reselling refers to the procuring of natural gas from a supplier or aggregator and reselling it to gas buyers by a Participant known as reseller; and

l Supply refers to the procuring or producing and selling of indigenous or imported natural gas to gas buyers in the Philippines or abroad by a Participant known as a supplier.

SECTION 3. FISCAL INCENTIVES. - The fiscal incentives provided under Section 38 of RA No.12120 are as follows:

a. VALUE-ADDED TAX (VAT) EXEMPTION. - The purchase and sale of indigenous natural gas and aggregated gas shall be exempt from VAT. Provided, that the exemption natural gas.aggregated gas and power generated by generation facilities using indigenous from VAT for aggregated gas is only to the extent of the amount of indigenous natural gas attributed to be in the aggregated gas.This includes:

1 purchase and sale of indigenous natural gas and aggregated gas by an

aggregator. reseller. supplier. person authorized by the Energy Regulatory Commission (ERC to operate facilities used in the generation of electricityor an end-user and

I. purchase and sale of electricity or ancillary services produced by a

generation facility using indigenous natural gas and/or aggregated gas by a person authorized to:

S BUREAU OF INTERNALREVENU OF CORDS MANAGFMEN IT DIVISION 1 operate facilities used in the generation of electricity or ancillary services:

2 sell,broker.market or aggregate electricity to end-users MAR 17 2026 Page|2

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3 consolidate electric power demand of end-users for the

purpose of purchasing and reselling electricity on a group basis: 4 engage in the distribution of electricityor 5) procure or provide ancillary services.

These shall include all modes of purchase and sale, whether through a supply agreement: a duly authorized market such as,but not limited to.the wholesale electricity spot market or the ancillary reserves market,financial gas contracts,NGSPA:or through other modes.

b.INCENTIVES UNDER TITLE XIII OF THE TAX CODE.-AIl PDNGI Facilities

as certified by the DOE.may avail of the tax incentives under Title XIII of the Tax Code provided that they are included in the Strategic Investment Priority Plan (SIPP) and duly registered with the Board of Investments (BOI.

to the Quarterly VAT Declaration (BIR Form No.2550Q) SECTION 4. REQUIREMENTS FOR THEAVAILMENT OF THEVAT EXEMPTION.-To qualify for VAT exemptionthe following documents shall be attached

1.For Participants:

wboMiUi Jo t0 g MAR 1'7 2026 TSECA R TRENVENUE LA ERNENT BUREAU For Generation Facilities: i.Endorsement from the DOE's Oil Industry Management Bureau (OIMB) Endorsement from DOE's Electric Power Industry Management Bureau DOE-OIMB Certification indicating the volume and percentage of Indigenous Natural Gas sold by a Participant for the taxable quarter. (EPIMB) confirming that the Generation Facility is using Indigenous Natural Gas under Section 3(a(ihereof and confirming that the Participant is engaged in the sale of Indigenous Natural Gas under Section 3(aiihereofand

ii.DOE-EPIMB Certification on the power produced from Indigenous Natural Gas for the corresponding taxable quarter.

Endorsement. In both cases, a Certified True Copy of the DOE Permit shall be attached to the DOE

the Quarterly VAT Declaration. VAT exemption availed of i.e.. Section 38 of R.A. No. 12120) on Field Item Number 14A of In preparing the Quarterly VAT Declaration, taxpayers shall indicate the legal basis of the

XIII OF THE TAX CODE.-The availment of incentives under Title XIII of the Tax Code shall be governed by the provisions of Title XIII of the Tax Code and its Implementing Rules and Regulations. SECTION5.REQUIREMENTSFOR AVAILMENT OF INCENTIVES UNDER TITLE

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Unless otherwise provided by law.the availment of fiscal incentives under Title XIIl of the SECTION6.PROHIBITION AGAINST DOUBLE AVAILMENTOFINCENTIVES.

Tax Code shall be a disqualification on the availment of similar tax incentives provided under the RA No.12120 and other speeial laws.

SECTION 7.REPEALING CLAUSE.-All revenue rules and regulations and other revenue issuances or parts thereof.which are inconsistent with these Regulations, are hereby amended or modified accordingly

not be affected thereby SECTION 8.SEPARABILITY CLAUSE.-If any clause,sentence,provision or section of these Regulations shall be held invalid or unconstitutional, the remaining parts thereof shall

comes first. SECTION 9. following its publication in the Official Gazette or in the BIR Official website, whichever EFFECTIVITY.-These Regulations shall take effect fifteen 15 days

FREDERICK D.GO Secretary of Financ

Recommending Approval: MAR 10206

CHARLITO MARTIN R.MENDOZA Commissioner of Internal Revenue BUREAU OFINTERNAL REVENUE RECORDS MANAGEMENT DIVISION

MAR 17 2026

K-1/EACRII/RBB/TGCA B ADMIN UNIT-2 IME 210:109m

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