AMENDING FURTHER SECS. 2.57.2 AND 2.58 OF REVENUE REGULATIONS NO. 2-98, AS AMENDED, SUBJECTING TO CREDITABLE WITHHOLDING TAX THE INTEREST PORTION OF THE REFUND OF METER DEPOSITS…

“Article 8. Exemption from Payment of Meter Deposit – All consumers shall be exempt from payment of meter deposits since private distribution utilities have incorporated the cost of these electric watthour meters in their
rate base. Electric cooperatives shall use their respective
Reinvestment Funds to procure electric watthour meters for their
consumers.

“In cases of loss and/or damage to the electric
meter due to the fault of the customer, he shall bear the replacement of
the cost of meter.” (emphasis supplied)

Corollarily, a similar
exemption from the payment of meter deposit was subsequently granted to
non-residential electricity consumers when ERC issued ERC Resolution No.
2005-10RM, dated January 18, 2006, otherwise known as the “Distribution Services and Open Access Rules (DSOAR)”

Article 3.4.2 of DSOAR, states:

“3.4.2 NON-RESIDENTIAL ELECTRICITY CUSTOMERS

“For the establishment of credit, non-residential electricity customers shall submit a bill deposit to guarantee payment of bills. xxx xxx xxx

“ The bill deposit shall be refunded within one
month from the termination of the service provided that all bills have
been paid. xxx xxx xxx

“All customers shall be exempt from the payment
of meter deposits. In cases of loss and/or damage to the electric meter
due to the fault of the customer, the customer shall bear the full
replacement cost of the meter. Within 90 days following the effectivity
of the DSOAR, all DUs shall submit a proposal to ERC on the methodology
and timeline for the refund of all existing meter deposits.” (emphasis
supplied.)

On June 4, 2008, after having conducted public
consultations with several distribution utilities (DUs) and various
consumer groups on the subject of how to go about the refund of meter
deposits of those electricity consumers from their respective DUs, ERC
came up with ERC Resolution No. 8, series of 2008, approving and
adopting the “Rules Governing the Refund of Meter Deposits to Residential and Non-Residential Consumers”.

Said rules, among others, have provided the DUs with
guidelines and parameters for the refund of meter deposits pertinent to
each type of consumer (i.e., residential and/ or non-residential
consumer) as well as the applicable interest rates and formulae to be
used in determining the corresponding interest to be paid. A timeline
for the duration of the refund period is also found in Section 1 of
Article IV thereof which stipulates that “The refund of meter
deposits and its applicable interest must be completed by the DUs not
longer than sixty-six (66) months from the effectivity of these Rules”.

In view of the impending refunds of the meter deposits
and the corresponding amount of interest that had accrued thereon by
the DUs to their residential customers, these Regulations are hereby
promulgated, pursuant to the provisions of Section 244 in relation to
Section 57 (B) of the National Internal Revenue Code of 1997, as
amended, and the above rules promulgated by ERC, in order to include
said interest payments as one of those income payments subject to
creditable withholding tax under Sec. 2.57.2 of Revenue Regulations No.
2-98, as amended.

SEC. 2. Amendments to Sec. 2.57.2 of Revenue Regulations No. 2-98, as Amended – Sec. 2.57.2 of Revenue Regulations No. 2-98, as amended, is hereby further amended, to read as follows:

“Sec. 2.57.2 Income payments subject to
creditable tax and rates prescribed thereon – Except as herein otherwise
provided, there shall be withheld a creditable income tax at the rates
herein specified f or each class of payee from the following items of
income payments to persons residing in the Philippines:

xxx                     xxx                      xxx

“(U) MERALCO Payments on the following:

(1) MERALCO Refund arising from Supreme Court
Case G.R. No. 14814 of April 9, 2003 to customers under Phase IV as
approved by ERC – On gross amount of refund given by MERALCO to
Customers with active contracts as classified by MERALCO – Twenty Five
Percent (25%); To Customers with terminated contracts – Thirty Two
Percent (32%); and

(2) Interest income on the refund of meter
deposits determined, computed and paid in accordance with the “Rules to
Govern Refund of Meter Deposits to Residential and Non-Residential
Customers”, as approved by the Energy Regulatory Commission under
Resolution No. 8, series of 2008, dated June 4, 2008
implementing Article 8 of the Magna Carta for Residential Electricity
Consumers and ERC Resolution No. 2005-10 RM (otherwise known as DSOAR)
dated January 18, 2006, exempting all electricity consumers from the
payment of meter deposit.

On gross amount of interest whether paid directly to the customers or applied against customer’s billing:

(i ) Residential and General Service
customers whose monthly electricity consumption exceeds 200 kwh as
classified by MERALCO – Ten percent (10%);

(ii) Non-Residential customers – Twenty percent (20%);

(V) Interest income on the refund paid either
through direct payment or application against customers’ billings by
other electric Distribution Utilities (DUs) in accordance with the rules
embodied in ERC Resolution No. 8, series of 2008, dated June 4, 2008,
governing the refund of meter deposits which was approved and adopted by
ERC in compliance with the mandate of Article 8 of the
Magna Carta for Residential Electricity Consumers and Article 3.4.2 of
DSOAR, exempting all electricity consumers, whether residential or
non-residential, from the payment of meter deposit.

On gross amount of interest whether paid directly to the customers or applied against customer’s billing:

(i ) Residential and General Service
customers whose monthly electricity consumption exceeds 200 kwh as
classified by the concerned DU- Ten percent (10%)

(ii) Non-Residential- Twenty percent (20%).

SEC. 3. Returns and Payment of Taxes Withheld at Source –
Sec. 2.58 (A) (2) of Revenue Regulations No. 2-98, as amended by
Revenue Regulations 8-2005, is hereby further amended to read as
follows:

“Sec . 2.58. RETURNS AND PAYMENT OF TAXES WITHHELD AT SOURCE –

(A) Monthly return and payment of taxes withheld at source –

“(1) WHERE TO FILE –

xxx                           xxx                           xxx

(2) WHEN TO FILE –

xxx                           xxx                           xxx

“ MERALCO and other Distribution Utilities (DUs) required to withhold taxes pursuant to Sec. 2.57.2 (U) and (V) above
shall submit a Monthly Alphalist of Payees (MAP) (Annex “A”) for each
calendar quarter, which shall be electronically attached to the monthly
remittance return of the calendar quarter (e.g. BIR Form 1601-E for the
quarter ending March with attached MAP for January, February, March).
It shall contain an alphalist of customers from whom taxes have been
withheld for the return period and in whose behalf, the taxes were
remitted under BIR Form No. 1601-E showing the total amount of income
and taxes withheld and remitted.

“xxx                           xxx                           xxx

xxx                           xxx                           xxx”

SEC. 4. Repealing Clause – The provisions of
any revenue regulations, revenue memorandum orders or circulars or any
other revenue issuance inconsistent herewith are hereby repealed,
amended, or modified accordingly.

SEC. 5. Effectivity Clause – These regulations shall take effect fifteen (15) days following publication in a newspaper of general circulation.

Adopted: 4 Feb. 2009

(SGD.) MARGARITO B. TEVES
Secretary of Finance

Recommending Approval:

(SGD.) SIXTO S. ESQUIVIAS IV
Commissioner of Internal Revenue