DoF clarifies 12% VAT on electricity is paid only once

The Department of Finance (DoF) clarified that power consumers only pay a 12% value-added tax (VAT) once, refuting claims of double taxation in the electric power industry.

Finance Secretary Carlos G. Dominguez III explained that under the Electric Power Industry Reform Act (EPIRA), VAT is imposed separately at each stage of electricity production, but ultimately the consumer bears the total 12% VAT on the entire electricity service.

This clarification comes after Energy Regulatory Commission (ERC) Chairperson and Chief Executive Officer Agnes VST Devanadera suggested that VAT should only be collected from power distributors and proposed removing the VAT on generation charges.

Dominguez defined double taxation as the imposition of tax twice for the same goods, for the same purpose, by the same taxing authority, and within the same jurisdiction, which he stated is not occurring in the electric power industry.

The unbundling of electricity pricing under EPIRA was cited as the reason why VAT is applied at different stages of production, not as a form of double taxation.