Power Sector Assets and Liabilities Management Corporation (PSALM) (1)

April 30, 2014 FIRB RESOLUTION NO. 002-14 SUBJECT MATTER : Power Sector Assets and Liabilities Management Corporation (PSALM) (1) WHEREAS, the Power Sector Assets and Liabilities Management Corporation (PSALM) is mandated to manage the efficient and orderly sale, disposition and privatization of all existing National Power Corporation (NPC) generation assets, liabilities, Independent Power Producer (IPP) contracts, real estate and all other disposable assets of the NPC under Republic Act No. 9136 (Electric Power Industry Reform Act of 2001); WHEREAS, the conduct of these functions has resulted in the Value-Added Tax (VAT) liabilities of the PSALM for 2010 and 2012 in the total amount of PhP7,282,049,992.83. For 2010, the deficient VAT in the amount of PhP1,075,065,551.40 arose from the following transactions: 1. Failure to subject to the 12% VAT imposed under Sections 105 and 106 of the National Internal Revenue Code or NIRC, as amended, incomes from supply of fuels in the amount of PhP2,330,126,160.74; 2. Failure to subject to VAT the turnovers to Local Government Units (LGUs) of power plants in exchange for the extinguishment of Real Property Taxes owed by PSALM, which turnovers are deemed sale pursuant to Section 106 (B) (2) (b) of the Tax Code, as implemented by Revenue Regulations (RR) No. 16-2005, particularly under Section 4.106-7 (a) (2) (ii) thereof (DISTRIBUTION OR TRANSFER TO CREDITORS IN PAYMENT OF DEBT OR OBLIGATION) in the total amount of PhP2,317,687,742.68; 3. Under-remittance of output tax in the amount of PhP408,093,626.95, in violation of Section 114 of the NIRC; 4. Disallowance pursuant to Section 110 of the NIRC of undue claims of input taxes consisting of: a) Over-claim in the amount of PhP100,865,163.43 per matching of input taxes claimed per returns and input taxes per the Summary List of Purchases; b) Input tax on purchases from non-VAT suppliers PhP580,082.95; c) Input tax in the total amount of PhP4,270,044.70 which were indicated to be from various suppliers with the same TIN 001-1888; d) Input tax from unverified purchases PhP271,927.90; e) Unverified input tax BIR-RVAT PhP32,214.32; and f) Input tax claimed/taken up twice Php520,862.02. 5. Failure to present the certificates of VAT withheld issued by payors as required under Section 9.245 of RR No. 2-98, as last amended, to support the amount PhP2,694,320.72 in Creditable VAT Withheld claimed as tax credit/payment against PSALM's net VAT payable. IacHAE For 2012, the deficiency VAT in the amount of PhP6,206,984,441.43 arose from the following transactions: 2012 Collections subject to VAT per Books/FS Tax Base Tax Due 1. Collection of IPPA generation 35,591,834,642.00 4,271,020,157.04 payments 2. Collection of IPPA monthly 15,889,873,123.52 1,906,784,774.82 payments 3. Proceeds from sale of Generation Assets 169,216,864.00 20,306,023.68 4. Output tax on collection of power 1,613,769,421.56 receivables 5. Other receipts and income 5,904,470.00 708,536.40 Collections subject to VAT per 51,656,829,099.52 7,812,588,913.50 audit/Output tax Output tax per VAT returns 1,605,604,472.07 Basic output tax per audit 6,206,984,441.43 WHEREAS, the PSALM applies for tax subsidy as it does not have the financial resources to settle these tax obligations with the Bureau of Internal Revenue; NOW, THEREFORE, BE IT RESOLVED, AS IT IS HEREBY RESOLVED, to grant tax subsidy to the PSALM to cover its Basic Deficiency VAT liabilities for 2010 and 2012 in the amount of SEVEN BILLION TWO HUNDRED EIGHTY TWO MILLION FORTY NINE THOUSAND NINE HUNDRED NINETY TWO PESOS AND 83/100 (PhP7,282,049,992.83) only: Provided, that such availment shall be in accordance with the terms and conditions of Section 15 of the 2014 General Appropriations Act, subject to the availability of funds therefor, pursuant to the terms and conditions of the Rules and Regulations to Implement the Subsidy Provision under Executive Order No. 93. (SGD.) LAURA B. PASCUA Undersecretary Department of Budget and Management (SGD.) ADRIAN S. CRISTOBAL, JR. Undersecretary Department of Trade and Industry (SGD.) EMMANUEL F. ESGUERRA Deputy Director-General National Economic and Development Authority (SGD.) ESTELA V. SALES Deputy Commissioner Bureau of Internal Revenue (SGD.) ALEXIS F. MEDINA Director Bureau of Customs (SGD.) TRINIDAD A. RODRIGUEZ Officer-in-Charge National Tax Research Center Head, FIRB Secretariat (SGD.) JEREMIAS N. PAUL, JR. Undersecretary of Domestic Finance Group Presiding Officer-FIRB