PRESIDENT Ferdinand “Bongbong” Marcos Jr. has ordered the granting of real tax benefits to independent power producers (IPPs) operating under Build-Operate-Transfer (BOT) scheme contracts with government-owned or -controlled corporations (GOCCs).
Marcos issued Executive Order (EO) No. 36 through Executive Secretary Lucas Bersamin, ordering the reduction and condoning of real property taxes (RPTs) assessed by local government units (LGUs) on the power generating facilities of IPPs within their locality.
The EO cited that various LGUs have taken the position that IPPs operating in their territories are not entitled to exemptions and privileges enjoyed by GOCCs concerning real property taxes on their property, machinery and equipment used in the generation and distribution of electric power. These LGUs have even threatened to enforce actions against IPPs, including the levy and public auction of affected properties
“While IPPs are taxable entities liable to pay the said RPTs, a substantial portion of the RPT has been contractually assumed by the National Power Corporation/Power Sector Assets and Liabilities Management Corporation under the Build-Operate-Transfer scheme and similar contracts, and therefore carry the full faith and credit of the National Government,” the EO reads.
It was also noted that the closure and non-operation of IPPs, as well as defaulting on their tax obligations with the concerned LGU, will “entail substantial losses to the government, force the public to resort to more costly electric power source alternatives, and cause rotating power outages.”
Under Section 277 of the Local Government Code of 1991, “the President may, when public interest so requires, condone or reduce the RPT and interest of any province or city, or a municipality within Metropolitan Manila Area.”
Section 1 of EO 36 reduces all RPT liabilities of IPPs for 2023, including special levies for machinery and equipment used in electricity production, to an amount based on a 15 percent assessment level of fair market value, depreciated at two percent per annum, minus the amount already paid by the IPPs.
It includes the BOT scheme contracts of the IPPs denominated as Power Purchase Agreements, Energy Conversion Agreements, or other contractual agreements with GOCCs that were assessed by the LGUs imposing the real property taxes “for all the years up to CY (calendar year) 2023.”
“All RPT payments made by IPPs over and above the reduced amount under Section 1 of this Order shall be applied to their RPT liabilities for succeeding years,” the EO stated. (SunStar Philippines)