The Department of Finance, upon the recommendation of the Bureau of Internal Revenue (BIR), has issued Revenue Regulations (RR) No. 5-2026, which further amends Section 2.57.2 of RR No. 2-98 (the Consolidated Withholding Tax Regulations). The new rule imposes a creditable withholding tax (CWT) on the gross remittances that the Independent Electricity Market Operator of the Philippines (IEMOP) makes to generation companies and other market participants for electricity sold through the Wholesale Electricity Spot Market (WESM). The regulations were signed by the Secretary of Finance on 17 September 2026 and received by the BIR Records Management Division on 1 October 2026.

Key provisions

  • 2% CWT on gross remittances. A new item under Section 2.57.2 subjects the gross remittances by IEMOP to generation companies and other market participants, for electricity sold through the WESM, to a 2% creditable withholding tax.
  • Gross means gross. "Gross remittances" refer to the total amount payable to the generation companies and other market participants for the sale of electricity, before any deductions.
  • IEMOP is a withholding agent only. IEMOP is designated solely as a withholding agent and is not considered to have income arising from the remittances.
  • Definitions. The RR defines IEMOP, the WESM, and "generation companies and market participants", the latter being entities that sell electricity through the WESM and receive gross remittances from IEMOP in settlement of those transactions.

IEMOP's duties

As withholding agent, IEMOP must: (a) deduct and withhold the tax on all gross remittances; (b) remit the tax through the BIR's Electronic Filing and Payment System (eFPS), together with the Alphabetical List of Payees submitted via eSubmission; (c) issue BIR Form No. 2307 (Certificate of Creditable Tax Withheld at Source) to each electricity seller subject to withholding on or before the 20th day after the close of the taxable quarter, or upon the payee's request; and (d) furnish the LT Document Processing & Quality Assurance Division of the Large Taxpayers Service, on or before the last day of the month following the close of each taxable quarter, a duly certified list of electricity buyers under Annex "A" of the RR.

Who is affected

Generation companies and other WESM participants that sell electricity through the spot market and receive settlement remittances from IEMOP, as well as IEMOP itself as the market operator.

Effectivity

RR No. 5-2026 takes effect fifteen (15) days following its publication in the Official Gazette or on the BIR official website, whichever comes first. Inconsistent issuances are repealed, amended or modified accordingly.

Practical takeaways

  • Expect WESM settlement proceeds to be reduced by 2% of the gross amount once the rule takes effect, and plan cash flow accordingly.
  • The tax withheld is creditable. Sellers should collect and reconcile the BIR Form No. 2307 issued by IEMOP each quarter so the tax can be credited against their income tax due.
  • Because the base is the gross amount before any deductions, reconcile IEMOP settlement statements against the certificates received.
  • Review existing withholding arrangements with WESM counterparties to avoid gaps or double withholding on the same spot-market sales.

Source: Bureau of Internal Revenue.

This alert was prepared by OS Law for general information only and is not legal advice. Please consult counsel on how these rules apply to your specific circumstances.