[Ask the Tax Whiz] A guide to VAT exemptions for natural gas stakeholders

The Philippine Tax Whiz provides guidance on the fiscal incentives available to the natural gas industry under Revenue Regulations (RR) No. 2-2026, in line with the broader policy direction of promoting energy security and sustainability

With global energy markets facing volatility, the rising cost of fuel, including natural gas, has become a pressing concern for businesses, power producers, and consumers alike. These price fluctuations directly affect electricity rates and overall economic stability, making it more important than ever to explore measures that can help ease the burden.

In response, the Philippine government has introduced policies to promote the use of locally sourced energy while also providing tax relief to businesses in the industry. A key law supporting this effort is Republic Act No. 12120, also known as the Philippine Natural Gas Industry Development Act, which aims to develop and expand the country’s natural gas sector. Complementing this, RR No. 2-2026 lays down detailed guidelines on how qualified entities can avail of fiscal incentives, particularly value-added tax (VAT) exemptions.

What are the fiscal incentives for the Natural Gas Industry?

Under these new guidelines, the primary incentives come in the form of VAT exemptions designed to encourage the use of indigenous natural gas.

The purchase and sale of indigenous or locally sourced natural gas are fully exempt from VAT. For aggregated gas, meaning a mixture of local and imported gas, only the portion derived from indigenous sources is exempt from VAT.

This incentive also extends to electricity generation. Power and related support services produced using indigenous natural gas, whether fully or partially, may also be  VAT-exempt, helping promote cleaner and locally sourced energy.

Who can specifically apply for these incentives?

The VAT exemptions are available to a wide range of stakeholders in the natural gas value chain. These include:

• aggregators, resellers, and suppliers involved in the purchase and sale of natural gas. 
• persons authorized by the Energy Regulatory Commission to operate facilities used in the generation of electricity.end users or customers who directly consume the indigenous natural gas or the electricity generated from it

This broad coverage ensures that both upstream and downstream participants can benefit from the incentives.

How can taxpayers avail of these fiscal incentives?

To avail of these VAT exemptions, compliance with specific documentary requirements is essential

The Documentary Requirements for the Availment of Fiscal Incentives

In both cases, a certified true copy of the Department of Energy (DOE) permit must be attached to the endorsement.

Additionally, when preparing the Quarterly VAT Declaration, taxpayers must indicate the legal basis of the VAT exemption in Field Item Number 14A.

With gas prices continuing to fluctuate, taking full advantage of available tax incentives can help businesses control costs and maintain more stable pricing. However, properly securing these benefits requires careful compliance with documentary and reporting requirements, as errors or missing documents may lead to disqualification or tax issues. Consulting experts like ACG can provide the guidance needed to ensure compliance and maximize available tax incentives. – Rappler.com

Mon Abrea is a Global Tax Policy Expert and Chief Tax Advisor of the Asian Consulting Group (ACG), the Philippines’ premier tax advisory and investment consulting firm—providing tax strategy, compliance, and policy advisory services to multinational corporations, foreign investors, and government institutions. For strategic tax advisory, CONSULT ACG, or you may also send an email to consult@acg.ph to host investment and tax briefing in key cities across Asia, Middle East, Oceania, Europe and North America.