Energy investors seek to retain perks amid TRAIN 2 streamlining

  • PE2 president Alexander Ablaza (lower photo, 6th from right) manifests position on urgency of fiscal incentives during the initial deliberation of the House Committee on Ways & Means on the EE&C bill on 13 March 2018 (Combined photo from congress.gov.ph).
    PE2 president Alexander Ablaza (lower photo, 6th from right) manifests position on urgency of fiscal incentives during the initial deliberation of the House Committee on Ways & Means on the EE&C bill on 13 March 2018 (Combined photo from congress.gov.ph).

A NONPROFIT has asked legislators to modify certain provisions of a pending bill promoting energy efficiency to align it with the second phase of Republic Act 10963 or Tax Reform for Acceleration and Inclusion (TRAIN 2), which will repeal incentive provisions of an existing law.

“Given the parallel legislative process for TRAIN Package 2, which considers the repeal of incentive provisions of Executive Order No. 226, we now see the need to modify Section 20 on Fiscal Incentives of the EE&C (Energy Efficiency and Conservation) Bill,” said the Philippine Energy Efficiency Alliance, Inc. (PE2) in its letter to the House of Representatives’ committee on ways and means.

In the letter, PE2 President Alexander Ablaza said the pending bill should specify the recommended incentives for projects that will be needed to ensure the financial viability of energy-efficienct investments.
The energy efficiency bill should also remove its express reference to Executive Order No. 226, or the 1987 Omnibus Investments Code, he said.

It should also identify the Board of Investments (BoI) as the lead investment promotion agency to administer the fiscal incentives for energy efficiency projects, while removing restrictions on ownership by nationality.
PE2 also wants the bill to specify a minimum 15-year period to avail of the recommended fiscal incentives.

“To effectively address these needs, PE2 respectfully forwards our proposed rewording of Section 20 of the EE&C Bill,” it said.

Its proposed rewording of Section 20 states that during the first 15 years from the passage of the law, energy efficiency projects should be included in the Strategic Investments Priorities Plan (SIPP) of the government.

It also says that the application by a project proponent for registration of such project should be duly acted upon by the BoI on the basis of the endorsement issued by the Department of Energy (DoE).

A certified project should also be entitled to receive a certificate of entitlement from the Fiscal Incentives Review Board.

It said that a Filipino natural person or partnership or any other association, cooperative, or corporation organized under Philippine law, whether Filipino or up to 100% foreign-owned, which is a proponent of an energy efficiency project, as duly endorsed by the DoE, should be entitled to the following incentives: income tax holiday; zero percent value-added tax (VAT) rate; tax and duty exemption on imported capital equipment.

Specifically, for the first six years of its commercial operations, the project proponent is sought to be exempt from income taxes levied by the National Government.

The selling price, remuneration or consideration received by a project proponent is proposed to be subject to zero percent VAT, pursuant to the National Internal Revenue Code of 1997, as amended.

All project proponents should also be entitled to zero-rated VAT on its purchases of local supply of goods, properties and services needed for the development, construction and installation of its plant facilities.

Within the first 10 years upon the issuance of an endorsement by the DoE, the importation of technologically energy-efficient machinery, equipment, vehicles, spare parts and materials is to be exempt 100% from customs duties and national internal revenue tax payable.

At the end of the 15-year period, the Fiscal Incentives Review Board may suspend or cancel the grant of such incentives upon a joint recommendation of the DoE and the BoI that they are no longer required in order to ensure the financial viability of energy efficiency investments.

PE2 earlier said that energy efficiency and conservation should be treated as the “first fuel” of the economy to slow down the rise in energy prices by deferring around 45,900 megawatts (MW) of energy infrastructure upgrades through 2040.

It said consistent with the DoE’s road map, the economy will have to proactively shave off at least 182 metric tons of oil equivalent in energy demand in the next 22 years to meet the 2040 targets and save the economy around P36 trillion in energy purchases.

PE2, which describes itself as a nonprofit, nonmarket, non-state civil society organization, said the Philippines is the only country in the region without a mandatory energy efficiency and conservation policy framework or mainstreamed fiscal incentives for related investments. — Victor V. Saulon

Written/Posted by: 
Victor V. Saulon

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Philippine Energy Efficiency Alliance Inc. (PE2), is a non-stock, non-profit organization of energy efficiency market stakeholders.

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