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Energy efficiency industry claims eligibility for 6-year tax holiday

energy efficiency industry claims eligibility for 6 year tax holiday 816x445 - Energy efficiency industry claims eligibility for 6-year tax holiday

THE energy efficiency industry said energy-saving projects should qualify for a six-year income tax holiday based on its interpretation of the Omnibus Investments Code.

According to the Philippine Energy Efficiency Alliance (PE2), if energy efficiency and conservation (EEC) projects are treated as locally-sourced power, proponents are eligible for the tax holiday.

“PE2 seeks a six-year income tax holiday, which is legally feasible under EO (Executive Order) 226, if all EE (energy-efficient) projects are treated as a first fuel — an indigenous resource — for pioneer status,” Alexander Ablaza, the group’s president, told BusinessWorld via text Wednesday.

In a separate statement, the industry said the tax break “is crucial in ensuring that ESCO (energy service companies) and third-party investments in EEC equipment assets installed in non-owned and non-leased premises draw commercial-grade returns.”

Executive Order No. 226, or the Omnibus Investments Code, provides for a six-year tax break for pioneering projects or those which use a design, formula, scheme, method, process, or system of production that is new and untried in the Philippines.

Mr. Ablaza said renewable energy projects that are non-pioneer should be given the same incentive. “There was precedent — before the RE (renewable energy) law was passed in 2008, BoI (the Board of Investments) granted all RE projects pioneer status, whether the technology was pioneering or not,” he said.

The Department of Energy (DoE) is currently developing guidelines for entities seeking fiscal incentives for their energy-saving projects.

Based on the implementing rules for Republic Act No. 11285, or the EEC Act, such incentives are given to projects endorsed by the DoE and registered with the investments board.

Green projects which produce at least 15% in energy savings can qualify for specific incentives, according to the DoE draft.

Renewable energy, including EEC projects, is listed as a priority investment sector in the BoI’s investment plan.

Meanwhile, PE2 welcomed the DoE’s commitment to prioritize energy-efficient projects for an incentive endorsement.

In a recent webinar hosted by the European Chamber of Commerce of the Philippines, the DoE said it prefers to endorse such projects from certified and registered ESCOs.

Providing them with tax breaks allows the government to “remain focused on the delivery of energy savings rather than the mere replacement or modernization of equipment assets,” PE2 said. — Adam J. Ang

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