Marcos OKs cut in 2025 real property taxes for independent power producers

President Ferdinand Marcos Jr. has ordered the reduction and pardon of all interest and penalties on real property taxes (RPTs) levied on independent power producers (IPPs) for 2025.

In a statement, Malacañang said the cut in RPT liabilities of IPPs is “to prevent defaults and economic losses that could affect electricity supply and the government’s fiscal stability.”

Issued on November 28, Executive Order (EO) 106 reduced the amount of all RPT liabilities for this year “to an amount equivalent to the tax due if computed based on an assessment level of 15% of the fair market value of said property, machinery and equipment, depreciated at the rate of 2% per annum, less any amount already paid by the IPPs.”

The reduced RPT liability includes special levies accruing to the Special Education Fund on the power generation facilities of IPPs under a build-operate-transfer (BOT) scheme and similar contracts with government-owned or -controlled corporations (GOCCs) that are assessed by local government units (LGUs) and other authorized entities for all years up to 2025.

Marcos also condoned all interests and penalties on the deficiency RPT liabilities of the concerned IPPs.

EO 106 stated that all RPT payments made by the IPPs “over and above the reduced amount…  shall be applied to their real property tax liabilities for succeeding years.”

It also tasked the Department of Interior and Local Government (DILG) and the Department of Finance (DOF) to monitor the compliance of concerned LGUs, with the DOF told to submit a progress report in the next six months.

This is the third time that the President directed the reduction and condonation of RPT liabilities of IPPs. He issued similar EOs that reduced RPT liabilities for 2023 and 2024.

EO 106 noted that various LGUs have taken the position that IPPs are not entitled to the RPT exemptions and privileges enjoyed by GOCCs, and have threatened actions such as levies and sale at public auction of affected IPP properties.

The directive however cited Republic Act 7160 or the 1991 Local Government Code which stated that GOCCs engaged in the generation and transmission of electricity also enjoy RPT exemptions and privileges.

EO 106 added that a substantial portion of RPTs charged to IPPs are contractually assumed by the National Power Corporation (NAPOCOR)/Power Sector Assets and Liabilities Management Corporation (PSALM) under a build-operate-transfer scheme and similar contracts, and therefore carry the full faith and credit of the national government. 

It warned that the collection of RPTs from IPPs for 2025, which were assessed at the maximum assessment level of 80% by concerned LGUs “will trigger massive direct liabilities on the part of NAPOCOR/PSALM, thereby threatening their financial stability, the government's fiscal consolidation efforts, the stability of energy prices, and may even trigger further cross-defaults and significant economic losses across all sectors.” 

“As the operations of affected IPPs provide an estimated grid capacity of 1,085 megawatts, their closure or non-operation will entail substantial losses to the government and force the public to resort to more costly electric power source alternatives or rotating power outages,” it added. — JMA, GMA Integrated News