VAT Ruling No. 099-99

September 16, 1999 VAT RULING NO. 099-99 Sec. 108 (B) (3)-052-99-099-99 PNOC Energy Development Corporation PNOC Energy Companies Building, Merritt Road Fort Bonifacio 1201, Makati City Attention: Mr . Eduardo G . Maxino Vice-President, Corporate Services Gentlemen : This refers to your letter dated July 14, 1999 requesting in effect for the approval of your application for VAT zero-rating on your sale of sale of electricity to National Power Corporation (NPC) and that the validity of your application thereon be given effect as of the date when the same was filed. It is represented that as early as December 9, 1996, you have filed an application for zero-rating on your sale of electricity to NPC which has not yet been acted upon by this Office; that you surmised that the delay in the approval of your application was probably brought about by the different interpretations on the VAT liability of NPC, i.e., BIR Ruling No. 373-95 dated September 15, 1993 holding that NPC's VAT exemption was limited only to purchases of petroleum products and not of other goods and services which means that VAT can be included in billings to NPC for its purchase of electricity; that, however, the BIR held in another ruling (BIR Ruling No. 078A-95 dated April 26, 1995), that the sale of electricity to NPC was exempt from VAT, hence billings should exclude VAT; that the Department of Finance itself opined, in two memoranda dated October 21, 1997 and January 28, 1998, that the sale of electricity to NPC is "effectively zero-rated for VAT purposes". In reply, please be advised that, insofar as NPC is concerned, this Office has indeed maintained the position that NPC's tax exemption pertains only to its purchases of petroleum products such that all previous rulings to the contrary were subjected to revocatory rulings. Said revocation was precisely the subject of the first DOF memo dated October 21, 1997 and which this Office sought reconsideration of. On January 26, 1998, the Secretary of Finance, invoking his power of review under Section 4 of the Tax Code of 1997, rendered the final ruling and policy issue that NPC's purchase of electricity is subject to VAT zero-rating. The issue, therefore, of NPC's entitlement to VAT zero rating was finally resolved only on January 26, 1998 such that from then on, this Office has consistently held that the sales of electricity to NPC is zero-rated for VAT purposes. (VAT Ruling Nos. 003-99 dated January 7, 1999; 015-99 dated February 12, 1999; 022-99 dated March 11, 1999; 052-99 dated May 13, 1999). Such being the case, your request for the zero-rating of your sales of electricity to NPC which is already on file before this Office on December 9, 1996 is hereby confirmed and made effective as of January 26, 1998. This ruling is being issued on the basis of the foregoing facts as represented. If, upon investigation, it will be disclosed that the facts are different, then this ruling shall be considered null and void. Very truly yours, (SGD.) BEETHOVEN L. RUALO Commissioner of Internal Revenue