Global Daily Tax News, Philippines Issues Regulations On Natural Gas VAT Exemption, (Mar 25, 2026)

Authorities in the Philippines have issued new revenue regulations granting a value-added tax exemption for indigenous natural gas and related power generation.

The regulations implement fiscal incentives under Republic Act No. 12120, or the Philippine Natural Gas Industry Development Act.

The regulations provide for an exemption for 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.

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).

To qualify, taxpayers 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 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 themselves of similar incentives under RA 12120 and other special laws.

Bureau of Internal Revenue Commissioner Charlito Martin Mendoza said: "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. 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."

The regulations enter into force within 15 days of their publication on the BIR's website on March 17, 2026.