Manila: The Department of Finance (DOF), following the recommendation from the Bureau of Internal Revenue (BIR), has issued new revenue regulations granting value-added tax (VAT) exemption on indigenous natural gas and related power generation.
According to Philippines News Agency, the BIR stated that this initiative is part of the government's strategy to develop the nation's natural gas industry. This aligns with the directive from President Ferdinand R. Marcos Jr. and Finance Secretary Frederick Go's policy to bolster priority industries while enhancing revenue management. The regulations implement fiscal incentives under Republic Act 12120, known as the Philippine Natural Gas Industry Development Act, which promotes natural gas as a safe and efficient energy source and provides guidelines for VAT exemption availment.
The regulations specify that VAT exemptions apply to the sale and purchase of indigenous natural gas, aggregated gas, and electricity generated using such gas, including associated power generation services. The exemption for aggregated gas is exclusive to the portion derived from indigenous natural gas to ensure precise targeting of incentives. Transactions covered include those by suppliers, aggregators, resellers, and generation facilities, as well as participants in the Philippine downstream natural gas industry, contingent upon certification by the Department of Energy (DOE).
The BIR noted that the issuance establishes clear guidelines for VAT incentives, detailing documentation and certification prerequisites to ensure compliance. To qualify, participants must present an endorsement from the DOE's Oil Industry Management Bureau, alongside certification of the volume and percentage of indigenous natural gas sold during the taxable quarter. Generation facilities are required to obtain certification from the DOE's Electric Power Industry Management Bureau, verifying their use of indigenous natural gas and the electricity output generated from it. Participants and generation facilities must also attach their DOE permit to the endorsement documents.
To prevent incentive misuse, the BIR regulations stipulate that entities availing fiscal incentives under Title XIII of the Tax Code are disqualified from similar incentives under Republic Act 12120 and other special laws, thus reinforcing compliance and accountability. BIR Commissioner Charlito Martin Mendoza acknowledged the potential of natural gas to reduce energy costs and enhance national energy security, stating that these regulations fully implement RA No. 12120 mandates by offering clear guidance on incentives that will foster investment in the Philippine Natural Gas Industry.
The regulations will be effective 15 days post-publication in the Official Gazette or on the BIR website, whichever is sooner.
