Revised process on remittance of VAT on power generation and other related charges

To avoid delay in the remittance of VAT on power generation charges, the BIR has revised the procedure in the collection and remittance of VAT on power generation and other related charges.

Under the new procedure, the VAT on sale of electricity and ancillary services shall be paid by the distribution companies and electric cooperatives together with the generation and other fees. Unlike before where the VAT is remitted after it is collected from the enduser, the new process requires the distribution companies and electric cooperatives to pay the VAT upfront on the purchase of electricity and ancillary services.

The amount collected by the distribution companies and electric cooperatives from the end-user, including the VAT, shall not form part of their gross receipts. Also, the VAT may not be claimed as input VAT by the distribution companies and electric cooperatives since these are mere pass through charges. Instead, the amount collected from the end-user as payment for generation and other VATable charges, including the VAT, shall form part of the gross receipts and output VAT of the generation or transmission company, accordingly.

In transition, all outstanding deferred VAT in the books of generation companies, aggregators, market operators, retail electricity suppliers, and other suppliers of electricity up to billing period ending August 25, 2012 shall be remitted on or before November 20, 2012.

Distribution companies and electric cooperatives are required to remit VAT on their purchases made prior to August 25, 2012 on or before November 15, 2012 to generation companies, aggregators, market operators, retail electricity suppliers and other electricity suppliers. These suppliers are then required to remit the same to the BIR within the prescribed period. Applicable penalties shall be imposed on failure to remit the VAT within the prescribed period.

The new procedures shall take effect beginning the billing period August 26 to September 25, 2012.

(Revenue Memorandum Circular No. 62-2012, October 25, 2012)

Tax Brief – November 2012

Punongbayan and Araullo