EE&C bill incentives approved by House panel, bill readied for plenary readings

HOUSE OF REPRESENTATIVES, QUEZON CITY, 12 November 2018 – The Committee on Ways and Means (CWM) of the House of Representatives approved earlier today Section 20 on fiscal incentives of the Energy Efficiency and Conservation (EE&C) substitute bill. Upon motion of CWM vice chairperson Lianda B. Bolilia, CWM chairperson Estrellita B. Suansing declared the fiscal incentives provision of the pending EE&C bill, as transmitted by the House Committee on Energy (COE) on 28 August 2018, approved without amendments. This milestone CWM approval paves the way for the numbering of the substitute bill, the finalization of committee reports and the submission of the measure to the House plenary for second and third readings.

During the CWM meeting, COE Vice Chairman Carlos Roman Uybarreta ably introduced the EE&C bill and defended its proposed incentives with estimates of accrued reductions in final energy demand, as well as the third-party capital that will need to be mobilized through a suitable package of fiscal incentives that the COE approved on 13 August 2018. Rep. Uybarreta presented the PE2 study which reveals that for every P 1.00 of granted incentives in the form of 6-year income tax holiday, duty and tax-free importation of capital equipment and zero-rated value added tax, an estimated P 2.31 will flow back to the national treasury as additional tax revenues through the first 15 years of equipment asset economic life.

As an industry resource person, PE2 president Alexander Ablaza highlighted the need for a minimum 15-year certainty for long-term equity investors, whether Filipino or foreign, by ensuring that the law provides 15-year availability of such incentives, before it is reviewed for either extension or termination. Ablaza also said that the bill should have clear language that removes restrictions on ownership by nationality in the granting of said incentives by Government.

Ablaza also assured the Committee on Ways and Means and the Department of Finance (DOF) that the granting of fiscal incentives to energy efficiency projects will not cause leakage in the internal revenue system, but on the contrary, serve as a tax revenue generator with the 231% recovery of foregone revenues. DOF Director Juvy C. Danofrata presented how other ASEAN governments are incentivizing energy efficiency projects and sought industry support for the ongoing legislation for the incentive rationalization bill (known as TRABAHO) pending in the Senate.

The approved Section 20 of the EE&C bill reads as follows:

Sec. 20. Fiscal incentives. – During the first fifteen (15) years from the passage of this Act, energy efficiency projects as defined in this Act shall be included in the Strategic Investments Priorities Plan (SIPP) of the Government. The application by a project proponent for registration of an energy efficiency project shall be duly acted upon by the boi on the basis of the endorsement issued by the doe. A duly certified energy efficiency project shall also be entitled to receive a certificate of entitlement from the Fiscal Incentives Review Board. A proponent of an energy efficiency project, whether Filipino or foreign-owned, as duly endorsed by the DOE, shall be entitled to the following incentives:

(a) Income Tax Holiday (ITH) — For the first six (6) years of its commercial operations, the duly certified energy efficiency project proponent shall be exempt from income taxes levied by the national government.

Additional investments in the project shall be entitled to additional income tax exemption on the income attributable to the investment: provided, that the development of new energy efficiency projects shall be treated as a new investment and shall therefore be entitled to a fresh package of incentives: provided, further, that the entitlement period for additional investments shall not be more than three (3) times the period of the initial availment of the ITH.

(b) Zero Percent Value-Added Tax Rate — The selling price, remuneration or consideration received by a project proponent for an energy efficiency project shall be subject to zero percent (0%) value-added tax (VAT), pursuant to the National Internal Revenue Code (NIRC) of 1997, as amended.

All energy efficiency project proponents shall be entitled to zero-rated value added tax on its purchases of local supply of goods, properties and services needed for the development, construction and installation of its plant facilities.

This provision shall also apply to the whole process of developing energy efficiency projects including, but not limited to, the services performed by subcontractors and/or contractors.

(c) Tax and Duty Exemption on Imported Capital Equipment — Within the first ten (10) years upon the issuance of an endorsement by the DOE, the importation of technologically energy-efficient machinery, equipment, vehicles, spare parts and materials shall be to the extent of one hundred percent (100%) of the customs duties and national internal revenue tax payable thereon: provided, that the machinery, equipment, vehicles, spare parts, and materials are directly and actually needed and used exclusively for energy efficiency projects.

The fiscal incentives shall be available to all proponents of duly certified energy efficiency projects for a period of fifteen (15) years from the passage of this Act. At the end of such period, the fiscal incentives review board may suspend or cancel the grant of such incentives upon a joint recommendation by the DOE and the BOI that the incentives are no longer required in order to ensure the financial viability of energy efficiency investments.