DOF approves withholding tax cut on Meralco refund

The Department of Finance (DOF) on Monday said the withholding tax on the refund due to customers of the Manila Electric Company (Meralco) has been reduced to 15 percent.

In an emailed statement, the DOF said Finance Secretary Carlos Dominguez III approved a revenue regulation (RR) which reduced the creditable withholding tax on the refund to 15 percent from 25 to 32 percent previously.

“Under the existing RR issued by the Bureau of Internal Revenue (BIR), the creditable withholding tax for the refund paid to Meralco is 25 percent for customers with active contracts, and 32 percent for those with terminated contracts,” it said.

“These rates will be cut under the new RR approved by Dominguez to a flat 15 percent effective January 1, 2019 as provided under Section 17 of TRAIN ...” it added.

Signed by President Rodrigo Duterte into law in December 2017, the Tax Reform for Acceleration and Inclusion (TRAIN) Act expanded the value-added tax (VAT) base and reduced personal income taxes as part of efforts to raise more revenues starting January 2018.

“We continue to process the refund and this ruling will basically affect the recipients of the refund,” Joe Zaldarriaga, Meralco spokesperson, told GMA News Online.

The refund is now being processed, but the details will have to be finalized in coordination with the Energy Regulatory Commission (ERC).

“It is ongoing and we get guidance from the regulator as to the implementation of the program,” Zaldarriaga noted.

Under the new RR, the withholding tax on the interest income on the refund to Meralco’s non-residential customers was also lowered to 15 percent from 20 percent.

The withholding tax on interest income on the refund paid to electric distribution utilities was likewise cut to 15 percent from 20 percent.

But the residential and general service customers with monthly consumption exceeds 200 kilowatts per hour will continue to have a withholding tax of 10 percent.

The DOF cited the refund ordered by the Supreme Court (SC) in April 2003 when it affirmed the decision of the then-Energy Regulatory Board (ERB) to refund overcharged Meralco customers.

The high court ordered Meralco to refund some P28 billion to its customers, saying the company could not pass on its income tax expenses to consumers. —VDS, GMA News