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Advocates Philippines
BBM Grants Real Tax Benefits To Independent Power Producers Under BOT Scheme Contracts
Photo credit: PCO
President Ferdinand R. Marcos Jr. has issued an executive order extending real tax benefits to Independent Power Producers (IPP) operating under Build-Operate-Transfer (BOT) scheme contracts with government-owned or -controlled corporations (GOCCs). The move comes as a measure to protect the power generation sector and prevent potential power shortages.
Executive Order (EO) No. 36, signed by Executive Secretary Lucas Bersamin on behalf of the President, reduces and condones real property taxes (RPTs) assessed by local government units (LGUs) on the power generating facilities of IPPs. The EO addresses the concerns raised by various LGUs, which questioned the exemptions and privileges granted to IPPs in terms of real property taxes on their machinery and equipment used for electricity generation and distribution.
The EO acknowledges that while IPPs are taxable entities responsible for paying RPTs, a significant portion of these taxes has been contractually assumed by the National Power Corporation/Power Sector Assets and Liabilities Management Corporation under the BOT scheme and similar contracts, thereby backed by the full faith and credit of the National Government.
Failure of IPPs to fulfill their tax obligations with the concerned LGUs could lead to the closure and non-operation of these facilities, causing substantial losses to the government and forcing the public to rely on more expensive electric power sources, potentially leading to rotating power outages.
Citing Section 277 of the Local Government Code of 1991, the EO empowers the President to reduce or condone RPTs and interest of any province, city, or municipality within the Metropolitan Manila Area when public interest demands such action.
According to Section 1 of EO 36, all RPT liabilities of IPPs for the calendar year 2023, including special levies accruing to the Special Education Fund on property, machinery, and equipment directly used for electricity production under the BOT scheme and similar contracts, are now reduced to an amount equivalent to the tax due based on an assessment level of 15 percent of the fair market value of the property. This value will be depreciated at a rate of two percent per annum, less the amount already paid by the IPPs.
The executive order also covers BOT scheme contracts denoted as Power Purchase Agreements, Energy Conversion Agreements, or other contractual arrangements with GOCCs that were subjected to real property taxes by LGUs for all years up to CY 2023.
All RPT payments made by IPPs beyond the reduced amount specified in Section 1 of the order will be applied to their RPT liabilities for the following years.
The issuance of EO 36 aims to promote the stability and continuity of power generation operations, safeguarding the interests of both the government and the public in ensuring an uninterrupted and cost-effective electricity supply.
Executive Order (EO) No. 36, signed by Executive Secretary Lucas Bersamin on behalf of the President, reduces and condones real property taxes (RPTs) assessed by local government units (LGUs) on the power generating facilities of IPPs. The EO addresses the concerns raised by various LGUs, which questioned the exemptions and privileges granted to IPPs in terms of real property taxes on their machinery and equipment used for electricity generation and distribution.
The EO acknowledges that while IPPs are taxable entities responsible for paying RPTs, a significant portion of these taxes has been contractually assumed by the National Power Corporation/Power Sector Assets and Liabilities Management Corporation under the BOT scheme and similar contracts, thereby backed by the full faith and credit of the National Government.
Failure of IPPs to fulfill their tax obligations with the concerned LGUs could lead to the closure and non-operation of these facilities, causing substantial losses to the government and forcing the public to rely on more expensive electric power sources, potentially leading to rotating power outages.
Citing Section 277 of the Local Government Code of 1991, the EO empowers the President to reduce or condone RPTs and interest of any province, city, or municipality within the Metropolitan Manila Area when public interest demands such action.
According to Section 1 of EO 36, all RPT liabilities of IPPs for the calendar year 2023, including special levies accruing to the Special Education Fund on property, machinery, and equipment directly used for electricity production under the BOT scheme and similar contracts, are now reduced to an amount equivalent to the tax due based on an assessment level of 15 percent of the fair market value of the property. This value will be depreciated at a rate of two percent per annum, less the amount already paid by the IPPs.
The executive order also covers BOT scheme contracts denoted as Power Purchase Agreements, Energy Conversion Agreements, or other contractual arrangements with GOCCs that were subjected to real property taxes by LGUs for all years up to CY 2023.
All RPT payments made by IPPs beyond the reduced amount specified in Section 1 of the order will be applied to their RPT liabilities for the following years.
The issuance of EO 36 aims to promote the stability and continuity of power generation operations, safeguarding the interests of both the government and the public in ensuring an uninterrupted and cost-effective electricity supply.
Jul 28, 2023
