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Philippine Renewable Energy Law Grants Tax Holiday For Developers

by Mary Swire,, Hong Kong

22 December 2008

It has been announced that the Philippine government has passed into law the Renewable Energy Act 2008 (RA 9513), which will award large tax concessions to energy companies in a bid to commercialize renewable energy sources.

The passing of the law is very significant for the country's energy sector, which has been anticipating its introduction for almost 20 years now, and will use the bill to try to increase the energy self-sufficiency of the Philippines by 60% over the next two years.

Described by government officials as the "first and most comprehensive renewable energy law in Southeast Asia", the bill will enable the energy sector to expand the development of solar, wind, ocean, biomass, geothermal and hydroelectric forms of energy by offering fiscal incentives in the form of tax concessions to energy developers.

Once implemented, renewable energy companies will be awarded with a 7-year exemption from income tax. When this 7-year tax holiday expires, the government will then reintroduce corporate income tax at a rate of 10%; 20% lower than its current rate.

Value-added tax levied on the power generated from renewable energy sources will be scrapped, and a host of measures relating to the taxation of the industry's equipment will be introduced, including:

  • The introduction of a 1.5% tax cap on original equipment and machinery costs;
  • A tax credit scheme for the purchase of new machinery or equipment; and
  • A 10-year ban on the duties levied on imports of equipment required by the country's renewable energy developers.

Additionally, carbon credits generated under the regime will also be given tax immunity.

Speaking of the bill's introduction last Wednesday, the country's Energy secretary Angelo Reyes commented:

"This measure will ultimately ensure a market for renewable energy, and provide a system that will allow consumers to choose green sources of energy in the long-term."

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