VAT Ruling No. 067-99

July 14, 1999 VAT RULING NO. 067-99 108 (B) (3) 000-00 067-99 SGV & Company 6760 Ayala Avenue 1226 Makati City Attention: Atty . C . P . Noel Tax Division Gentlemen : This refers to your letter dated June 26, 1998 requesting confirmation of your opinion that the sale of electricity by your clients, WESTERN MINDANAO POWER CORPORATION (WMPC) and SOUTHERN PHILIPPINES POWER CORPORATION (SPPC) to National Power Corporation (NPC) is an effectively zero-rated transaction pursuant to Section 108(B)(3) of the Tax Code of 1997. It is represented that WMPC and SPPC are corporations duly registered and licensed to do business in the Philippines by the Securities and Exchange Commission (SEC) and that they are both engaged in the business of, among others, selling electricity to NPC. In reply thereto, please be informed that in 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 F. 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 the purchases of NPC of electricity from independent power producers are subject to VAT at zero-rate. In view thereof, the sale of electricity of WMPC and SPPC 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 clients, WMPC and SPPC shall apply with the Revenue District Officer concerned having jurisdiction over your clients principal place of business for the effective zero rating of their sale of electricity to NPC pursuant to Revenue Regulations No. 7-95. 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 null and void. LibLex Very truly yours, (SGD.) BEETHOVEN L. RUALO Commissioner of Internal Revenue