BIR Ruling [DA-632-99]

November 10, 1999 BIR RULING [DA-632-99] SGV & Co. 6760 Ayala Avenue 1226 Makati City Attention: Atty . C . P . Noel Tax Division Gentlemen : This refers to your letter dated November 6, 1998 requesting confirmation of your opinion that the sale of electricity by your client, Northern Mindanao Power Corporation (NMPC) to National Power Corporation (NPC) is an effectively zero rated transaction pursuant to Section 108(B)(3) of the Tax Code of 1997. cdlex It is represented that NMPC sells electricity to NPC in accordance with the Energy Conversion Agreement entered into by and between Alsons Power Holdings Corporation (ALSONS), Tomen Corporation (TOMEN) and NPC. In reply thereto, please be informed that in the BIR Ruling No. 003-98 dated January 15, 1998 this Office held that the sale of electricity by San Pascual Cogeneration Co. to NPC is subject to the 10% VAT pursuant to then Section 102 of the Tax Code, as amended. However, in a Memorandum to the Commissioner of Internal Revenue dated January 26, 1998, the then Hon. Secretary of Finance Roberto De Ocampo, in the exercise of his power to review rulings issued by the BIR under Section 4 of the Tax Code of 1997, held that purchases of NPC of electricity from independent power producers are subject to VAT at zero-rate. In view thereof, the sale of electricity by NMPC to NPC is subject to zero percent (0%) VAT pursuant to Section 108(B)(3) of the Tax Code of 1997. It shall be understood, however, that your client, NMPC shall apply with the Revenue District Officer concerned having jurisdiction over your client's principal place of business for the effective zero rating of its sale of electricity to NPC pursuant to Revenue Regulations No. 7-95, as amended. Without an approved application for zero rating, the transaction otherwise entitled to zero rating shall be considered exempt. This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be disclosed that the facts are different, then this ruling shall be considered. Very truly yours, Commissioner of Internal Revenue By: (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner Legal and Enforcement Group