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MANILA — President Ferdinand Marcos Jr. has ordered the grant of real property tax benefits to independent power producers (IPP) operating under the Build-Operate-Transfer (BOT) scheme contracts with government-owned or -controlled corporations.

Executive Order No. 36 signed Tuesday reduces and condones real property taxes (RPTs) assessed by local government units (LGUs) on the power generating facilities of IPPs in their locality.

The order comes as local government units maintain that IPPs operating in their territories are not entitled to exemptions and privileges enjoyed by GOCCs with respect to real property taxes on their property, machinery, and equipment used in the generation and distribution of electric power.

Some local governments have allegedly threatened enforcement actions against small power players, including the levy and sale of their properties, at public auction.

The EO noted, however that while IPPs are taxable entities who must pay real property taxes, a substantial portion of these have been contractually assumed by the National Power Corporation/Power Sector Assets and Liabilities Management Corporation under the Build-Operate-Transfer scheme.

It adds that the closure and non-operation by the IPPs, defaulting on their tax obligations with the concerned local government, will entail substantial losses to the government, force the public to resort to more costly electric power source alternatives, and cause rotating power outages.

The EO mandates that all real property tax liabilities of IPPs for 2023 under the BOT scheme and similar contracts “are hereby 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 property, machinery and equipment depreciated at the rate of two percent per annum, less the amount already paid by the IPPs.”

This includes the BOT scheme contracts of the IPPs denominated as Power Purchase Agreements, Energy Conversion Agreements, or other contractual agreements with GOCCs that were assessed by the LGUs imposing the real property taxes “for all the years up to CY 2023.”

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