CTA orders BIR to refund P32.58 million to San Roque Power

THE Court of Tax Appeals (CTA) has ordered the Bureau of Internal Revenue (BIR) to refund or issue a tax credit certificate worth P32.58 million to San Roque Power Corp., ruling that its sale of ancillary services derived from hydropower qualifies for zero-rated value-added tax (VAT) treatment.

In a 36-page decision promulgated on June 9, the CTA Special Third Division partially granted the company’s petition and directed the BIR to refund or issue a tax credit certificate amounting to P32.6 million. The amount represents excess and unused input VAT attributable to zero-rated sales for the first to fourth quarters of fiscal year 2020.

San Roque Power initially sought a refund of P34.85 million in input VAT. The tribunal reduced the claim after reviewing supporting documents and VAT allocations, ruling that only P32.58 million was properly attributable to zero-rated transactions.

The company operates the 345-megawatt San Roque Hydroelectric Power Plant in Pangasinan and supplies electricity and ancillary services to the National Grid Corporation of the Philippines under a procurement agreement signed in 2017.

The case centered on whether ancillary services sold from hydropower-qualified facilities are subject to zero-percent VAT treatment under rules covering renewable energy generation.

The CTA said ancillary services, including power capacity and reserves sourced from the hydro facility, constitute sales of power generated from renewable energy and therefore qualify for VAT exemption.

The court rejected the BIR’s argument that the services were taxable because they did not involve actual energy dispatch, saying the transactions still involved the sale of hydro-generated power capacity. — Mark Joseph M. Sanchez