THE Bureau of Internal Revenue (BIR) said distribution utilities (DUs) and electric cooperatives (ECs) cannot claim input value-added tax (VAT) from generation and transmission charges, ruling these to be pass-through charges.

“The DUs and ECs must issue an invoice to customers, which include the sale and transmission of electricity and ancillary services, including the VAT of generation companies (GenCos) and transmission companies,” the BIR said in a circular issued recently.

“However, the DUs and ECs shall not claim any input from these. The proper claimant of input tax shall be the customers engaged in business based on the invoice to be issued by DUs/ECs.”

The amount invoiced by GenCos and transmission companies, which is included in the invoice issued by DUs and ECs, including the VAT charges, will be the basis of GenCos and transmission companies’ income tax and VAT liabilities.

Retail Electricity Suppliers (RES) also cannot claim input VAT on pass-through charges, the BIR said. The pass-through charges of RES for the sale of power are the transmission and distribution charges.

The BIR noted that a number of government charges will not be eligible for output tax and creditable withholding on VAT and income: energy tax; universal charges; benefits to host communities under EPIRA and Department of Energy Regulations No. 1-94; feed-in tariff allowance; national and local franchise taxes; and real property tax. — Beatriz Marie D. Cruz