VAT Ruling No. 014-98

May 21, 1998 VAT RULING NO. 014-98 Sec. 119-000-014-98 Manila Electric Company (MERALCO) Ortigas Avenue Pasig City Attention: Mr . Rolando R . Arbues Gentlemen : This refers to your letter dated December 4, 1997 requesting for a ruling as to whether or not the lease of your poles will be subject to the value-added tax. It is represented that MERALCO was granted a legislative franchise to transmit and distribute electric power in Manila and suburbs; that as a grantee, MERALCO is maintaining its poles, a necessary incident to its operation, wherein its high tension wires are strung; that some telephone and cable companies have requested MERALCO to allow them to lease the said poles to spare them from installing their own poles, hence, this request. In reply, please be informed that MERALCO, as an electric franchise grantee, is subject to the two (2) percent franchise tax on the gross receipts derived from the business covered by the law granting the franchise pursuant to Section 119 of R.A. No. 8424, otherwise known as the "Tax Reform Act of 1997". However, the lease of its poles to telephone and cable companies is not covered by the franchise granted to MERALCO to transmit and distribute electric power in Manila and suburbs, therefore, shall be subject to the 10% value-added tax pursuant to Section 108 of the said law. Very truly yours, (SGD.) LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue