Tax reduced for power producers under GOCC contracts

MANILA, Philippines – President Rodrigo Duterte has ordered the reduction of all real property tax and interest or penalties for power generation equipment for independent power producers with contracts with government corporations.

Through Executive Order No 60, all liabilities for real property tax, including special levies accruing to the Special Education Fund, assessed by local governments are "reduced to an amount equivalent to the tax due if computed based on an assessment level of fifteen percent (15%) of the fair market value of said property depreciated at the rate of 2% per annum."

The same goes for property, machinery, and equipment used by IPPs for the production of electricity under Build-Operate-Transfer and similar contracts with government-owned-and-controlled corporations (GOCCs).

All interests on such deficiency real property tax liabilities are also condoned, reads the EO.

The document, made public on Friday, July 27, also states that all real property tax payments made by the IPPs over and above the reduced amount mentioned above shall be applied to their real property tax liabilities for the succeeding years.

Reducing or condoning these taxes and fees is necessary, says the EO, because the National Grid Corporation or Power Sector Assets and Liabilities Management Corporation suffers when local governments levy these taxes on such IPPs since these corporations contractually assume the cost.

Local governments have been penalizing IPPs that are not GOCCs because the Local Government Code of 1991 states that only GOCCs engaged in producing and transmitting power get to enjoy privileges in real property tax and fees on power-generating equipment.

But the two GOCCs contractually assume the liabilities of some IPPs, hence the previously mentioned privileges ought to apply to these IPPs as well, reads the EO. –