The Department of Finance (DOF) on Monday approved a value-added tax exemption for indigenous natural gas and related power generation, in line with the Bureau of Internal Revenue’s (BIR) recommendation and to support the local natural gas sector.
Under Republic Act No. 12120 or the Philippine Natural Gas Industry Development Act, the new revenue regulations grant fiscal incentives within cleanly-delineated guidelines.
The VAT exemption applies to the sale and purchase of indigenous natural gas, aggregated gas, and electricity generated using the said gas, such as ancillary services pertinent to power generation.
The exemption for aggregated gas will only apply to the portion produced by indigenous natural gas, the BIR clarified.
“Covered transactions include those undertaken by suppliers, aggregators, resellers, and generation facilities, as well as participants in the Philippine downstream natural gas industry, subject to certification by the Department of Energy (DOE),” the bureau stated.
The BIR has provided guidelines on availing VAT incentives, including documentation and certification requirements to validate compliance.
“To qualify, participants must present an endorsement from the DOE’s Oil Industry Management Bureau, along with certification indicating the volume and percentage of indigenous natural gas sold during the taxable quarter,” the bureau said.
Likewise, generation facilities were instructed to acquire certification from the DOE’s Electric Power Industry Management Bureau to verify their use of indigenous natural gas and the amount of electricity made from the said gas.
Both participants and generation facilities must attach their DOE permit to the endorsement documents, said the BIR.
Safeguards against the misuse of incentives have been put in place to impose compliance and accountability, said the BIR. The new revenue regulations disqualify companies availing of fiscal incentives under Title XIII of the Tax Code from also availing additional incentives under RA 12120, or any other special law.
Natural gas could become vital in reducing energy costs and reinforce the country’s energy security, BIR Commissioner Charlito Martin Mendoza stressed.
“The BIR acknowledges the potential of natural gas to lower energy costs and help achieve national energy security. These regulations fully implement the mandates of RA No. 12120 by providing clear guidance on the availment of incentives that will support investment in the Philippine Natural Gas Industry,” he said.
“By establishing transparent and well-defined processes for VAT incentives on indigenous natural gas, we strengthen both the competitiveness of cleaner energy sources and the integrity of our tax system,” he added.
The regulations will take effect 15 days after publication. Amid the oil crisis triggered by the war in the Middle East, and, consequently, an impending transportation crisis, the VAT exemption on indigenous natural gas may may help reduce reliance on imported fuel.
