President Rodrigo Duterte has reduced and condoned real property taxes, interests and penalties assessed on power generation facilities of certain independent power producers (IPPs).
Duterte signed Executive Order (EO) 19, which directs the reduction of the 2015 and 2016 liabilities for real property tax on property, machinery and equipment that the IPPs used for the production of electricity under the build-operate-transfer scheme with government-owned-and-controlled corporations (GOCCs).
The liabilities are 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 said property, machinery and equipment depreciated at the rate of 2 percent per annum.”
“If any real property tax payments for 2015 and 2016 have been made by IPPs in excess of the reduced amount… such excess shall be applied to their real property tax for the succeeding years,” the EO said.
“All interests on such deficiency real property tax liabilities are also hereby condoned and the concerned IPPs are relieved from payment thereof,” it added.
Under Section 234 of the Local Government Code of 1991, GOCCs engaged in power generation and transmission enjoy a number of exemptions and privileges with respect to real property taxes, including an assessment level of 10 percent on all its lands and property as well as an exemption from pollution control.
The new EO, however, noted that “various” local government units (LGUs) have said IPPs, which are not GOCCs, are “not entitled to the exemptions/privileges of GOCCs” regarding real property taxes—with some LGUs “threatening” actions against IPPs.
Such a move, the document said, “would trigger massive direct liabilities” to GOCCs since a “substantial part” of the real property taxes charged against IPPs has been contractually assumed by the National Power Corporation and other GOCCs.
“The President of the Philippines may, when public interest so requires, condone or reduce the real property tax and interest for any year in any province or city or a municipality within the Metropolitan Area,” the EO said.