The Department of Finance (DoF), upon the recommendation of the Bureau of Internal Revenue (BIR), has issued new revenue regulations granting value-added tax (VAT) exemption on indigenous natural gas and related power generation, supporting the government’s push to develop the country’s natural gas industry.
The regulations implement fiscal incentives under Republic Act 12120 or the Philippine Natural Gas Industry Development Act, which promotes natural gas as a safe, efficient and cost-effective energy source, while providing clear guidelines on the availment of VAT exemptions.
Under the rules, VAT exemption applies to the sale and purchase of indigenous natural gas, aggregated gas and electricity generated using such gas, including ancillary services tied to power generation.
Exemptions for aggregated gas
The exemption for aggregated gas, however, applies only to the portion attributable to indigenous natural gas, ensuring that incentives are properly targeted.
Covered by the exemption are transactions, including those undertaken by suppliers, aggregators, resellers and generations facilities and DoE-certified participants in the Philippine downstream natural gas industry.
The BIR said the issuance provides clear guidelines on the availment of VAT incentives, including documentation and certification requirements to verify compliance.