Are customers of Electric Cooperatives subject to VAT?

 POWER GENERATION/DISTRIBUTION COMPANIES: RMC 62-2012 revises Question No. 26 of RMC 61-05 on the reckoning of VATable sale between the generation company and the end-user.  Under the new procedure, all collections by generation companies from distribution companies pertaining to generation and other VATable charges shall be deemed VAT inclusive.

It can be recalled that, under RMC 61-05, the procedure is that no VAT shall be due until and unless the distribution company has collected the generation fees from the end user.  Thus, notwithstanding the advances made by the distributors to the generation company of the generation and other VATable charges, such amount advanced shall not be subject to VAT.

Despite the new procedure, the amount collected by distribution companies (pass-through entity) from end-user shall not form part of the gross receipts of the distribution companies; said amount shall remain as gross receipts of the generation company.  Further, the corresponding input tax on such pass-on charges should not be claimed as credit by distribution companies.

This procedure shall take effect beginning billing period August 26 to September 25, 2012.  Hence, the BIR mandated all generation companies to remit all outstanding deferred VAT as of August 25, 2012 on or before November 20, 2012.  

On the other hand, distribution companies are required to remit VAT on their purchases prior to August 25, 2012 on or before November 15, 2012 to allow the generation companies to remit the same to the BIR within the prescribed period.  Failure to remit the VAT within the prescribed period shall warrant the imposition of penalties.

Bethuel V. Tanupan
CPA-Lawyer, CMA, MM, DipIFRS
Partner

Diaz Murillo Dalupan and Company is a member of HLB International.