DOE sets 10% income tax rate for renewable energy investors

Published August 19, 2021, 4:14 PM

by Myrna M. Velasco

Following consultations with the Department of Finance (DOF) and the Bureau of Internal Revenue (BIR), the Department of Energy (DOE) said it will issue a circular to serve as policy guide on the 10-percent corporate income tax (CIT) rate tol be levied to renewable energy (RE) investors in the country.


In an interview, Director Mylene Capongcol of the DOE-Renewable Energy Management Bureau (DOE-REMB) indicated that the enforcement of the 10 percent income tax rate to RE players “had been one of the major issues already resolved with the BIR and DOF” after a series of consultations and discussions by the DOE and RE industry players.

She qualified that Energy Secretary Alfonso Cusi formally sought the imprimatur of Finance Secretary Carlos G. Dominguez III on that policy matter through exchange of correspondence between the two agencies wherein the finance department just prompted the DoE to take reference on the key provisions of the Renewable Energy Act or Republic Act 9513 and its implementing rules and regulations (IRR) for the issuance of the circular.

Capongcol added that specific discussions were also done with the BIR. “They are amendable on the issuance of a Circular to institutionalize the 10% corporate income tax to be applied to the RE sector,” she said.

In a separate statement issued to the media, the DOE emphasized that the Circular relating to the tax regime governing RE investments will amend specific provisions in the IRR of the RE Law – primarily those pertaining to Section 13 (E) and Section 18 (C).

The DOE expounded that the circular will “address the long-standing concerns raised by RE developers” – including players in related services and businesses, such as the fabricators, manufacturers and other target beneficiaries of the lower tax rate for the green energy sector.

Capongcol pointed out the 10-percent tax rate will be imposed on RE companies after the expiration of their respective seven-year income tax holidays (ITH), which is an incentive mechanism extended to them for their investments in the domestic RE sector.

The energy official similarly conveyed that the other policy matter to be addressed in the DoE Circular will be the value added tax (VAT)-zero rated privilege for the RE sector, primarily the treatment that shall be applied in their input VAT payments.

According to the energy department, the circular will guarantee that “all fiscal incentives are properly availed of through efficient government processes.”

By addressing these tax policy concerns of the RE investors, the DoE is raising hopes that it could entice more robust capital flow for greenfield power projects that will then bring the country into its goal of instituting 35-percent of RE in the country’s energy mix by year 2030; and to ramp that up to 50-percent by year 2040.

Capongcol stressed “we have decided to come up with a more practical, proven and effective framework to facilitate increased investment in the RE capacities through a level playing field that would result in attainment of transparent and competitive rates.”