The Wholesale Electricity Spot Market (WESM) serves as the central trading hub for electricity in the Philippines, established under Republic Act No. 9136 to promote competitive pricing. The Independent Electricity Market Operator of the Philippines (IEMOP) manages the matching of supply and demand, handling the settlement process for these transactions. However, the anonymous nature of trading within this system creates significant friction with traditional tax compliance requirements, specifically regarding value-added tax (VAT) invoicing.
The core of the problem lies in the structure of WESM transactions. Because electricity is pooled and centrally co-ordinated, it is impossible to trace a specific sale from a generator to a particular buyer. This anonymity makes it virtually impossible for generators to issue a VAT invoice for every individual sale, which is the standard requirement for VAT-registered entities. This creates a compliance gap that disproportionately affects renewable energy developers. These developers often incur excess input VAT because they are entitled to zero-rated VAT on the power they generate and sell.
To recover these funds, they must file VAT refund claims with the Bureau of Internal Revenue (BIR). The BIR recognises the impracticality of per-transaction invoicing in this context. Consequently, the market has moved toward a monthly invoicing model aligned with the WESM billing timetable. IEMOP provides settlement statements to both buyers and sellers, which are then used as the basis for issuing invoices. While this approach attempts to align the invoicing cycle with the market’s operations, it fails to solve the underlying issue of volume and administrative burden.
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The monthly approach still faces a logistical bottleneck. Businesses are limited in the number of invoices they can issue by the Authority to Print (ATP) system. This system ties a specific serial number range to a business, restricting the volume of invoices that can be legitimately issued. In the traditional market, this volume is sufficient. In the WESM, however, the sheer number of unique trading participants means a business can exhaust its entire ATP allocation within just a few billing periods. Reapplying for a new ATP involves additional administrative costs and delays, creating a backlog that disrupts the settlement process.
One proposed solution is to shift from issuing invoices for every transaction or even every month to issuing them annually. Generators could use supplementary documents, such as credit memorandums, for monthly accounting purposes. The formal VAT invoice would then be issued once a year, reflecting the consolidated sales for that period. This approach would align with administrative feasibility and could reduce the burden on taxpayers, particularly as the government seeks to improve tax administration efficiency through legislative measures like the Ease of Paying Tax Act. Experts Push Measures to Stop AI Domain Abuse [1].
