ERC issues resolution implementing EVAT
The
Energy Regulatory Commission (ERC) recently adopted ERC Resolution No. 20 dated
07 November 2005 implementing Republic Act No. 9337 or the new Expanded Value
Added Tax Law in the electricity sector. The said Resolution allows Generation
Companies (GCs), the National Transmission Corporation (TransCo) and the Distribution
Utilities (DUs) to impose the E-VAT law on electricity sales consistent with
Revenue Memorandum Circular (RMC) No. 61-2005 issued by the Bureau of Internal
Revenue (BIR).
“The electricity consumers can rest assure that the ERC has done an extensive
review on the implementation measures of the EVAT affecting the electricity
sector. Consumer protection is a paramount concern of the ERC,” Chairman
Rodolfo B. Albano, Jr. stated.
“It will also be comforting for consumers to know that the impact of this new tax measure will be less than eight percent (8%) as a result of the removal of the 2% national franchise tax and that certain items are VAT zero-rated,” the ERC chief said.
The new tax measure which was made effective on 01 November 2005 will be based on the Gross Receipts (GRs) on sales and services of electricity by generation, transmission, and distribution companies. For VAT purposes, the GR which is reduced by discount and increased by penalties should be reduced further by the Energy Tax under Batas Pambansa 36, Benefits to Host Communities, security deposit on metering machines (including interests provided that when applied to consumer’s liability, it shall be subject to VAT), and the Universal Charges imposed under Republic Act No. 9136 or the Electric Power Industry Reform Act (EPIRA).
There are several items considered as VAT zero-rated namely: (1) sale of power or fuel generated through renewable sources of energy; and (2) sale of electricity to enterprises registered with the Philippine Economic Zone Authority (PEZA) or the Subic Bay Metropolitan Authority (SBMA).
Transactions made on or before 31 October 2005 but due for collection on or after 01 November 2005 and billed by 30 November 2005 are also considered to be VAT zero-rated. Such transactions include: (1) electricity sold, transmitted, and distributed; (2) deferred charges such as Generation Rate Adjustment Mechanism (GRAM) and Incremental Currency Exchange Rate Adjustment (ICERA). An inventory of the said Deferred Charges must be submitted to the BIR by 30 November 2005; and (3) Generation rate and foreign exchange adjustments to electricity sold on or before 31 October 2005 although billed and collected thereafter.
The VAT collected by the DUs on generation, transmission, and system loss shall be remitted to the concerned GC and TRANSCO, who in turn will be responsible for the tax due to the BIR.
“The ERC would like to emphasize that the electricity providers will not earn out of the VAT transactions. This is a pass through charge that is revenue-neutral. The ERC will perform confirmatory process on VAT imposed by the Generation, Transmission, and Distribution Utilities” the Chief Regulator stressed.
The ERC Chairman also guarantees to the electricity consumers that penalties including the corresponding VAT imposed on DUs by reason of their fault or negligence shall not be passed on to them.
November 17, 2005