Power co-ops not exempt from VAT, says BIR

MANILA, Philippines - The Bureau of Internal Revenue has reiterated that electric cooperatives registered with the National Electrification Administration are subject to income tax and value-added tax (VAT).

The BIR, in its response to Marinduque Electric Cooperatives Inc.’s request for a tax exemption, cited Republic Act 9337 which removed the exemption from VAT of electric cooperatives.

The same law states that electric cooperatives are subject to all other national government taxes and fees including VAT, filing, license or permit fees or taxes as the exemption granted to them lapsed on Dec. 31, 2003.

Electric cooperatives shall be subject to 20 percent final income tax on interest from any currency bank deposit and yield or any other monetary benefit from deposit substitutes and from trust funds and similar arrangements and royalties derived from sources within the Philippines.

They are also subject to a  capital gains tax on sales or exchanges of real property as well as documentary stamp taxes on transactions  with non-members except those with banks and insurance companies.

Sales of electricity by generation, transmission and/or distribution companies are  subject to 12 percent VAT on their gross receipts.

However, sale of power or fuel generated through renewable sources of energy such as but not limited to biomass, solar, wind, hydropower, geothermal, ocean energy and other energy sources using fuel and hydrogen cells shall be subject to zero VAT.

RA 9337 was enacted to help the government balance its budget through the collection of more revenues to address the budgetary problem and to sustain the provision of basic social services.      

Electric cooperatives used to be exempt from the payment of taxes under the National Electrification Administration Decree.

This exemption privilege, however, was withdrawn upon the enactment of the Local Government Code of 1991.

The taxes imposed on electric cooperatives are passed on to consumers.