Tax perk guidelines for RE developers set

MANILA, Philippines — Renewable energy (RE) developers can now avail of fiscal incentives, including income tax holiday and zero percent value-added tax (VAT) rate, as the government continues to push for clean energy amid worsening climate change.

Based on Revenue Regulation 7 of the Bureau of Internal Revenue (BIR), the government has set the policies and guidelines for the availment of tax perks under the Renewable Energy Act of 2008.

The document was signed by former finance chief Carlos Dominguez two days before the Duterte administration ended its term.

The government targets to increase the utilization of RE resources by institutionalizing the development of national and local capabilities in the use of RE systems and promoting its efficient and cost-effective commercial application by providing fiscal incentives.

Based on the regulation, existing RE projects shall be entitled to an income tax holiday (ITH) for seven years from the start of commercial operations or when the project has been issued a certificate of compliance and is ready to inject power to the grid.

New investments in RE shall also be entitled with the same period of ITH.

After availment of the ITH, all registered RE developers will pay a corporate tax of 10 percent on their net taxable income provided that they shall pass on the savings to the end-users in the form of lower power rates.

The BIR said all RE developers that acquire, operate, or administer existing facilities that were or have been in commercial operation for more than seven years, shall pay a corporate tax rate of 10 percent on their net taxable income, upon registration with the Department of Energy.

If an RE project fails to receive an ITH before full operation, developer may apply for accelerated depreciation in its tax books and be taxed on the basis of the same.

Further, the sale of power or fuel generated through RE sources of energy using technologies, such as fuel cells and hydrogen fuels, shall be subject to zero percent VAT rate.

In terms of RE commercialization, all manufacturers, fabricators and suppliers of locally produced RE equipment and components shall also be entitled to privileges.

These include VAT-free importation of all shipments necessary for the manufacture and fabrication of RE equipment and components provided that these are not manufactured domestically in reasonable quantity and quality at competitive prices.

The materials should also be used exclusively for RE equipment manufacture or fabrication, covered by shipping documents, and prior approval by the DOE has been obtained.

Earlier, the government said there is a need to bring down the country’s dependence on energy imports by developing RE and indigenous sources.

Data showed that only 29 percent of the country’s current energy mix comes from renewables, and the DOE would like to bring it up to 35 percent by 2030 or to 50 percent by 2040, as outlined in the Renewable Energy Roadmap.