THE COURT of Tax Appeals (CTA) has stood by its decision that denied the refund claim of EDC Burgos Wind Power Corp. worth P34 million allegedly representing its excess input value-added tax (VAT) traced to zero-rated sales for the period covering January to June 30, 2014.

In a 20-page decision dated June 2 and made public on June 6, the CTA full court said the firm failed to show that its sale of power generated qualified for a 0% VAT rating.

“We hold, instead, that a Certificate of Compliance (CoC) from the Energy Regulatory Commission (ERC) is required to prove that its sale of power generated or produced from renewable sources of energy qualifies as VAT zero-rated sales or effectively zero-rated sales.”

It noted that while EDC Burgos was able to secure the certificate, it was only after it started its commercial operation on Nov. 11, 2014.

Under the Electric Power Industry Reform Act of 2001 (EPIRA), renewable energy (RE) developers must secure a CoC from the ERC before their operations begin to categorize their sales as VAT zero-rated sales that do not translate to output tax.

The firm operates the 150-megawatt Burgos wind farm in Ilocos Norte, the biggest in the country.

EDC Burgos argued that obtaining a CoC from the ERC was not a requirement to qualify for a VAT zero rating on the sales it made during the period.

Citing the EPIRA, the tax tribunal said RE developers must obtain the necessary documents and certification before they can avail of the incentives provided under the law.

“Simply put, a renewable energy developer which generates power and sells the same is required to secure a CoC from the ERC,” it reiterated.

In a separate dissenting opinion, Associate Justice Roman G. Del Rosario said the firm need not secure a CoC since it anchored its refund claim on the Renewable Energy Law of 2008, not EPIRA.

“Accordingly, the requirement to submit a COC from the ERC is only a condition for availing the VAT zero-rating incentive on claims for refund based on the EPIRA,” he said, voting to grant the refund claim.

Citing Supreme Court jurisprudence, the magistrate added that since the claim was not filed under EPIRA, the RE developer only needs to show that it is a VAT-registered entity and that it has complied with the invoicing requirements under the Tax Code.

“Based on the aforequoted pronouncements, where the zero-rated VAT incentive invoked is not based on the EPIRA, the taxpayer claimant need not comply with the requirements under the EPIRA,” Mr. Del Rosario said. — John Victor D. Ordoñez