DOE approves 10% tax rate for RE developers

By Myrna M. Velasco – January 6, 2022, 3:33 PM
from Manila Bulletin

The Department of Energy (DOE) has finally cemented the policy that will grant 10-percent corporate tax rate for project-developers in the renewable energy (RE) sector.

Department of Energy

The department has concretized that edict via the issuance of Department Circular No. DC2021-12-0042 that was issued Dec. 24 last year to simplify the corporate tax rate to be imposed on RE investors.

As explained by the DOE, the implementation of 10-percent tax rate serves as an amendment to Sections 13 (E) and 18 (C) of Department Circular DC2009-05-0008; which is also in keeping with the prescriptions of the implementing rules and regulations (IRR) of Republic Act 9513 or the Renewable Energy Act (RE) Act of 2008.

The rationalization of the tax rate for the RE sector had been a more-than-a-decade protracted battle for many investors in the industry and the issuance of the DC had been an outcome of series of discussions with other relevant agencies, chiefly with the Department of Finance (DOF) and the Bureau of Internal Revenue.

According to DOE Secretary Alfonso G. Cusi, the amended policy “would address the long-standing concerns of the RE law’s target recipients, including RE developers, fabricators and manufacturers regarding the availment of the law’s incentives…particularly the automatic availment of the 10-percent corporate tax rate and zero-rate value added tax.”

As specified, the 10-percent tax rate shall be imposed on the qualified RE industry players at the expiration of their income tax holiday (ITH) incentives, as provided under the RE law.

“The new DOE Circular simplifies requirements for availment of said incentives, while ensuring proper availment through an efficient government process,” the energy department stressed. The circular will be rendered effective after 15 days of publication in newspapers of general circulation.

With that policy, the agency opined that RE project sponsors and players across the supply chain would be able to generate savings because of the reduced tax rate that they would be enjoying as investment perk; hence, the DOE is also expecting that this will redound to lower power rates for consumers.

The DOE further noted that the all-inclusive goal in instituting that policy is to entice broader capital flow for RE installations in the country — especially with the next wave of investments being targeted with the implementation of the Renewable Portfolio Standards (RPS) policy.

Under the RPS, mandated industry participants – primarily the distribution utilities (DUs) — will have to source prescribed percentage of their power supply from RE-generated capacity; and this will be increasing at yearly increment as directed by the DOE.

“The amendment of the RE Act’s IRR is seen to promote the further development of renewables with domestic and foreign investors,” the energy department stated.

The DOE similarly articulated that the new policy would help “accelerate the country’s transition toward energy sustainability by supporting the government’s principal goal of attaining clean and secure energy.”

In assessing the effectiveness of the newly issued Circular, the DOE emphasized that it “may conduct a review of the annual reports submitted by the RE developers to determine whether the objectives of the RE Act have been met.”