Marcos orders granting tax benefits to IPPs under BOT contracts with gov’t corporations

President Ferdinand "Bongbong" Marcos Jr. has directed the granting of real tax benefits to Independent Power Producers (IPP) that are operating under the Build-Operate-Transfer (BOT) scheme contracts with government-owned or -controlled corporations (GOCCs).

By authority of the President, Executive Secretary Lucas Bersamin signed  Executive Order (EO) No. 36, which aims to reduce and condone real property taxes (RPTs) assessed by local government units (LGUs) on the power generating facilities of IPPs within their localities

According to the EO, various LGUs have taken the position that IPPs operating in their territories are not entitled to exemptions and privileges enjoyed by the GOCCs, especially when it comes to real property taxes on their property machinery and equipment that are being utilized in the generation and distribution of electric power.                       

“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 stated.

The EO further indicated that the closure and non-operation by the IPPs, 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.”

Marcos’ latest order has emphasized that 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 of 1 of EO 36 said that all RPT liabilities of IPPs for the calendar year 2023, including special levies accruing to the Special Education Fund on property, machinery and equipment actually and directly used by the IPPs for the production of electricity under the BOT scheme and similar contracts, are hereby reduced to an amount equivalent to the tax due if computed based on an assessment level of 15 percent of the fair market value of the property, machinery and equipment depreciated at the rate of two percent per annum, less the amount already paid by the IPPs.

This will include 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 2023. — Anna Felicia Bajo/RSJ, GMA Integrated News