DoF implements Meralco refund tax reduction under TRAIN

Font Size

linemen Meralco

THE DEPARTMENT of Finance (DoF) has approved lower tax rates for refunds to be paid to customers of the Manila Electric Co. (Meralco), implementing a provision of Republic Act No. 10963 or the Tax Reform for Acceleration and Inclusion Act (TRAIN).

In a statement, the agency said Finance Secretary Carlos G. Dominguez III has signed a new revenue regulation (RR) providing for the reduction of the withholding tax rate for the Meralco refunds covered by a Supreme Court decision over 15 years ago.

This refers to the high court’s April 9, 2003 decision that the power distributor must refund customers who were overcharged in the period spanning February 1994 to February 1998 as the utility firm passed on its income tax payments through customers’ monthly electric bills.

Previous reports pegged the excess collections at P10.8 billion, but Meralco pegged the amount at P28.15 billion.

“Under the existing RR issued by the Bureau of Internal Revenue (BIR), the creditable withholding tax for the refund paid to Meralco is 25% for customers with active contracts and 32% for those with terminated contracts,” the DoF said in a statement sent yesterday.

“These rates will be cut under the new RR approved by Dominguez to a flat 15% effective Jan. 1, 2019 as provided under Section 17 of TRAIN.”

The petition for the Meralco refund came from the now-defunct Energy Regulatory Board, which has been replaced by the Energy Regulatory Commission.

The power distributor has been gradually settling the refund payments since.

The tax rate for refunds covering meter deposits for retail and general service customers will be retained at 10%, Finance Undersecretary Antoinette C. Tionko also clarified.

The new revenue issuance also covers the withholding tax on the interest income derived from other debt instruments, which went down to 15% from 20% previously. However, the RR had yet to be posted on the BIR Web site as of Monday afternoon.

Meralco’s controlling stakeholder, Beacon Electric Asset Holdings, Inc., is partly owned by PLDT, Inc. Hastings Holdings, Inc., a unit of PLDT Beneficial Trust Fund subsidiary MediaQuest Holdings, Inc., has interest in BusinessWorld through the Philippine Star Group, which it controls. — Melissa Luz T. Lopez