The Department of Finance, upon the recommendation of the Bureau of Internal Revenue (BIR), has issued new revenue regulations granting value-added tax (VAT) exemption on indigenous natural gas and related power generation, supporting the government’s push to develop the country’s natural gas industry.
The regulations implement fiscal incentives under Republic Act No. 12120 or the Philippine Natural Gas Industry Development Act, which promotes natural gas as a safe, efficient, and cost-effective energy source, while providing clear guidelines on the availment of VAT exemptions.
Under the rules, VAT exemption applies to the sale and purchase of indigenous natural gas, aggregated gas, and electricity generated using such gas, including ancillary services tied to power generation.
The exemption for aggregated gas, however, applies only to the portion attributable to indigenous natural gas, ensuring that incentives are properly targeted.
Covered transactions include those undertaken by suppliers, aggregators, resellers, and generation facilities, as well as participants in the Philippine downstream natural gas industry, subject to certification by the Department of Energy (DOE).
The BIR said the issuance provides clear guidelines on the availment of VAT incentives, including documentation and certification requirements to verify compliance.
To qualify, participants must present an endorsement from the DOE’s Oil Industry Management Bureau, along with certification indicating the volume and percentage of indigenous natural gas sold during the taxable quarter.
Generation facilities must obtain certification from DOE’s Electric Power Industry Management Bureau, confirming their use of indigenous natural gas and the amount of electricity produced from such gas.
Participants and generation facilities must attach their DOE permit to the endorsement documents.
The BIR regulations also include safeguards to prevent misuse of incentives.
Under the rules, availment of fiscal incentives under Title XIII of the Tax Code disqualifies entities from availing of similar incentives under RA 12120 and other special laws, reinforcing proper compliance and accountability.
BIR Commissioner Charlito Martin R. Mendoza highlighted the importance of natural gas to the country’s energy strategy and reaffirmed the Bureau’s commitment to sound tax administration.
“The BIR acknowledges the potential of natural gas to lower energy costs and help achieve national energy security. These regulations fully implement the mandates of RA No. 12120 by providing clear guidance on the availment of incentives that will support investment in the Philippine Natural Gas Industry,” said Mendoza.
“By establishing transparent and well-defined processes for VAT incentives on indigenous natural gas, we strengthen both the competitiveness of cleaner energy sources and the integrity of our tax system,” he added.
In line with the directive of President Ferdinand R. Marcos Jr. and the policy direction of Finance Secretary Frederick D. Go, the BIR continues to support priority industries while strengthening revenue administration.
The regulations will take effect 15 days after publication in the Official Gazette or on the BIR website, whichever comes first.
For more details, please visit the BIR’s website:
https://bir-cdn.bir.gov.ph/BIR/pdf/RR%20No.%202-2026.pdf
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