Reduction and Condonation of Real Property Taxes and Interest/Penalties on Power Generation Facilities of Independent Power Producers, Executive Order No. 157 (Philippines)

Local Government Units (LGUs) have assessed Real Property Taxes (RPT) on the machineries and equipment of Independent Power Producers (IPPs), based on their position that IPPs are not entitled to exemption and privileges extended to Government-Owned or Controlled-Corporations with respect to RPT on their property, machinery and equipment used in the generation and distribution of electric power. 

The Executive Order clarified that, although IPPs are the taxable entities, a substantial portion of the RPT has been contractually assumed by National Power Corporation (NPC)/Power Sector Assets and Liabilities Management Corporation (PSALM), which are government entities, under a Build-Operate-Transfer (BOT) scheme, and thus carry the full faith and credit of the National Government. 

The imposition of the RPT by the LGUs will trigger massive direct liabilities on NPC/PSALM which threatens their financial stability, and the stability of electricity prices. Further, closure and/or non-operation of these IPPs may trigger substantial economic losses to the Government which will threaten the security and reliability of electricity. The Executive Order states that RPT assessed by LGUs and other entities authorized to impose RPT for all years up to Calendar Year 2021, imposed on property, machinery and equipment actually and directly used by IPPs for the production of electricity under the BOT scheme and other similar contracts, shall be reduced. All interest and penalties on the deficient RPT liabilities are also condoned.