BIR slashes real property taxes of IPP plants

By Catherine Talavera (The Philippine Star)
Updated June 24, 2017 – 12:00am
http://www.philstar.com/business/2017/06/24/1712973/bir-slashes-real-property-taxes-ipp-plants

Under Executive Order No. 19 issued by Malacañang, all liabilities for real property tax for  2015 and 2016, on property, machinery and equipment actually and directly used by IPPs for the production of electricity under BOT and similar contracts with GOCCs, 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 the said property.

The same order also waived all interests on deficient real property tax liabilities.

Excess tax payments made by IPPs prior to the issuance of the order will be applied to their real property tax for the succeeding years.

Malacanang issued the executive order to address the threat on the financial stability of a number of GOCCs, as a substantial part of the real property taxes being charged against the affected lPPs have contractually been assumed by GOCCs such as the National Power Corp.,  and the Power Sector Assets and Liabities Management Corp.

“The payment of such taxes will trigger massive direct liabilities on the part of such GOCCs, thereby threatening their financial stability, the government’s fiscal consolidation efforts, the stability of energy prices, and worse, may even trigger further cross-defaults and significant economic losses across all sectors,” the EO said.

Under Section 234 of Republic Act 7160 or the Local Government Code of 1991 , GOCCs engaged in the generation and transmission of electricity are entitled to a number of exemptions/privileges with respect to real property taxes.

This includes an assessment level of 10 percent on all its lands, buildings, machineries and other improvements, as well as an exemption for all machinery and equipment that are actually, directly and exclusively used in the generation and transmission of electric power and machinery and equipment used for pollution control and environmental protection.

In 2014, the Aquino administration issued a similar EO on the reduction and condonation of real property taxes and interest of IPP power generation facilities under BOT contracts with GOCCs for the said year, in a bid to prevent an increase in power rates.