The Bureau of Internal Revenue (BIR) reminded local governments units (LGUs) that President Aquino has earlier allowed the condonation of real-property taxes assessed against independent power producers (IPPs) to help stabilize power prices.
Internal Revenue Commissioner Kim Jacinto-Henares issued Revenue Memorandum Circular 6-2015 to remindLGUs of the reduction and condonation of real-property taxes assessed against the power-generation facilities of IPPs for all the years up to 2014.
President Aquino earlier reduced the real-property taxes on IPPs for all the years up to 2014 to an amount equivalent to the tax due if computed based on an assessment level of 15 percent of the fair market value of the real properties, at a depreciated rate of 2 percent per annum.
The President also condoned all fines, penalties and interests on such deficiency real-property tax liabilities.
Using the power granted to him by the Local Government Code, the President issued the condonation of real-property taxes to ensure the stability of energy prices, saying that the forcible collection of real-property taxes by LGUs “may increase the cost of electricity and may trigger further cross-defaults and significant economic losses across all sectors.”
The current interpretation by the courts is that IPPs under build-operate-transfer contracts with the National Power Corp. do not enjoy its tax exemption. Based on this, the real properties, machines and equipment used by IPPs in their power-generation operations are also not exempt from real-property taxes imposed by LGUs.