RMC No. 74-2013: Circularizes the tax implications of Electric Cooperatives registered with the National Electrification Administration pursuant to BIR Ruling No. 398-2013

Key points

1. Taxes on registered ECs. ECs pay 20% Final Income Tax on interest from any currency bank deposit and yield or other monetary benefit from deposit substitutes, trust funds and similar arrangements, and royalties from Philippine sources. They pay 7.5% Final Income Tax on interest from a depositary bank under the expanded foreign currency deposit system, and Capital Gains Tax on sales of real property classified as capital assets or shares of stock.
2. Documentary Stamp Tax. ECs pay DST on transactions with non-members, except transactions with banks and insurance companies. When one party to a taxable document is DST exempt, the other, non-exempt party is directly liable.
3. VAT items. ECs bear VAT billed on purchases of goods and services. They pay VAT on sales for generation and distribution of electricity and on importation of machinery and equipment, including spare parts, directly used in generation and distribution. All other taxes apply unless a law expressly exempts them.
4. Removal of VAT exemption. Upon effectivity of RA 9337, the VAT exemption of electric cooperatives was removed. Under RR No. 16-2005, as amended by RR No. 4-2007 (Section 4.108-2 (13) and Section 4.108-3 (f)), sales of electricity by generation, transmission and/or distribution companies are subject to 12% VAT on gross receipts. Sale of power or fuel from renewable sources of energy is subject to 0% VAT.

Who is affected

• Electric Cooperatives registered with the National Electrification Administration