REVENUE REGULATIONS NO. 7-2022 issued on June 30, 2022 provides the policies and
guidelines for the availment of tax incentives provided under the Renewable Energy Act of
2008.
Renewable Energy (RE) developers and manufacturers, fabricators, and suppliers of
locally-produced RE equipment shall secure the certifications/ accreditations specified in these
Regulations before any incentive provided for in the Act may be availed of.
Existing and new RE developers and manufacturers, fabricators, and suppliers of
locally-produced RE equipment shall register with the Department of Energy (DOE), through
the Renewable Energy Management Bureau (REMB). The following certifications shall be
secured and submitted to the BIR:
a. DOE Certificate of Registration – issued to an RE developer holding a valid RE
Service/Operating Contract. For existing RE projects, the new RE
Service/Operating Contract shall pre-terminate and replace the existing Service
Contract that the RE Developer has previously executed with the DOE. The DOE
Certificate of Registration is issued immediately upon award of an RE
Service/Operating Contract covering an existing or new RE project or upon
approval of additional investment. Any investment added to existing RE projects
is subject to prior approval by the DOE.
b. DOE Certificate of Accreditation – issued to RE manufacturers, fabricators, and
suppliers of locally-produced RE equipment, upon submission of necessary
requirements as determined by the DOE, in coordination with the Department of
Trade and Industry (DTI).
RE developers shall secure the Certificate of Endorsement from the DOE prior to the
first year of availment of the 10% Corporate Income Tax rate incentive. Manufacturers,
fabricators, and suppliers of locally-produced RE equipment who import components, parts,
and materials necessary for the manufacture and/or fabrication of RE equipment shall secure a
Certificate of Endorsement from the DOE, through the REMB, on a per importation basis.
To qualify for incentives under the Act, RE developers, manufacturers, fabricators,
and suppliers of locally-produced equipment shall register with the Board of Investments
(BOI). The Certificate of Income Tax Holiday (ITH) Entitlement (CE) issued by the BOI is a
required attachment to the current annual Income Tax Return (ITR) to be filed with the BIR.
The ITH shall only be applied to the registered activity indicated in the CE. Failure to attach
the CE to the ITR may result to the forfeiture of the ITH incentive for the covered taxable year.
The following provisions shall govern the tax incentives and treatments on the DOEcertified existing and new RE developers of RE facilities in consultation with BOI, including
hybrid systems, in proportion to and to the extent of the RE component, for both power and
non-power applications:
A. Income Tax Holiday (ITH) – The duly-registered RE developer shall be exempt
from Income Taxes levied by the National Government for the period specified
in Section 4A of these Regulations.
B. Net Operating Loss Carry-Over (NOLCO) – The NOLCO of the RE developer
during the first three (3) years from the start of commercial operation shall be
carried over as a deduction from gross income for the next seven (7) consecutive
taxable years immediately following the year of such loss, subject to the
conditions specified in Section 4B of these Regulations.
C. Corporate Tax Rate – After availment of the ITH, all registered RE developers
shall pay a Corporate Tax of ten percent (10%) on their net taxable income as
defined in the National Internal Revenue Code (NIRC) of 1997, as amended:
Provided, That the RE developers shall pass on the savings to the end-users in the
form of lower power rates.
All RE developers that acquire, operate, and/or administer existing RE
facilities that were or have been in commercial operation for more than seven (7)
years, upon the effectivity of the Act, shall pay a Corporate Tax rate of 10% on
their net taxable income, upon registration with the DOE. For purposes of
availment of this incentive, the RE developer shall submit to the BIR the
documents specified in Section 4C of these Regulations.
In the years succeeding its initial availment of the 10% Corporate Income
Tax rate incentive, following the effectivity of the Regulations, the RE developer
shall attach to the ITR, in addition to the specified requirements, proof of
submission to the DOE and ERC of the Report, supported by technical and
financial documents, as required in Section1(E) of DOE Department Circular No.
DC2021-12-0042. To further prove that the RE developer has, during the previous
year, passed on the savings derived from this incentive to the end-users in the
form of lower power rates, the RE developer shall submit to the BIR the rates
approved by the ERC.
D. Accelerated Depreciation – If an RE project fails to receive an ITH before full
operation, the RE developer may apply for accelerated depreciation in its tax
books and be taxed on the basis of the same. If an RE developer applies for
accelerated depreciation, the project or its expansions shall no longer be eligible
to avail of the ITH. The RE developer shall inform the BIR, through the Revenue
District Office (RDO) where it is registered, that it is availing of the accelerated
depreciation instead of the ITH.
Plant, machinery and equipment that are reasonably needed and actually
used for the exploration, development and utilization of RE resources may be
depreciated using a rate not exceeding twice the rate which would have been used
had the annual allowance been computed. Any of the following methods of
accelerated depreciation may be adopted: i) declining balance method; and ii)
sum-of-the years digit method.
E. Zero Percent Value-Added Tax Rate – The sale of power or fuel generated through
renewable sources of energy such as, but not limited to, biomass, solar, wind,
hydropower, geothermal, ocean energy, and other emerging energy sources using
technologies such as fuel cells and hydrogen fuels, shall be subject to zero percent
(0%) Value-Added Tax (VAT) pursuant to the NIRC of 1997, as amended;
Provided, that ancillary services generated through renewable sources of energy
shall also be subject to zero percent (0%) VAT.
On the other hand, the purchase by an RE developer of local goods,
properties, and services needed for the development, construction, and
installation of the plant facilities of RE developers; and the whole process of
exploration and development of RE sources up to its conversion into power,
including, but not limited to, the services performed by subcontractors and/or
contractors shall also subject to zero percent (0%) VAT.
Accordingly, local suppliers/sellers of goods, properties, and services of
duly-registered RE developers should not pass on the 12% VAT on the latter’s
purchases of goods, properties and services that will be used for the development,
construction and installation of their power plant facilities. This includes the
whole process of exploring and developing renewable energy sources up to its
conversion into power, including but not limited to the services performed by
subcontractors and/or contractors.
The local suppliers of goods, properties, and services shall require from the
RE developer a copy of the latter’s BOI Registration and DOE Registration for
purposes of availing the zero percent (0%) VAT incentive.
F. Tax Exemption of Carbon Credits – All proceeds from the sale of carbon emission
credits shall be exempt from any and all taxes.
The tax exemptions and/or incentives provided for in Section 4 of these Regulations
shall be availed of by a registered RE developer of hybrid and cogeneration systems utilizing
both RE sources and conventional energy but only in proportion to and to the extent of the RE
component. Moreover, the tax exemptions and incentives for hybrid and cogeneration systems
shall apply only to the equipment, machinery, and/or devices utilizing RE resources.
In this regard, the RE developer shall secure with the DOE a certification to
distinguish the equipment, machinery, and/or devices utilizing RE resources. Only RE facilities
shall be entitled to the RE incentives. For “common facilities”, the DOE shall certify the
capacity of RE in megawatts to determine the ratio of the tax exemption privileges to be granted
to RE developers employing hybrid and co-generation systems. Moreover, a CE shall also be
secured from the BOI should the RE developer avail of the ITH and attach the same to the
annual ITR to be filed with the BIR.
All manufacturers, fabricators, and suppliers of locally-produced RE equipment and
components duly recognized and accredited by the DOE and upon registration with the BOI,
shall be entitled to the privileges set forth below on their sale of RE equipment to RE
developers:
A. Value-Added Tax (VAT)-free Importation of Components, Parts and Materials –
All shipments necessary for the manufacture and/or fabrication of RE equipment
and components shall be exempt from VAT on importation: Provided: That the
said components, parts, and materials comply with the conditions set forth in
Section 6A of these Regulations.
The importation of components, parts, and materials as allowed herein shall
not be subject to the issuance of an Authority to Release Imported Goods
(ATRIG) under Revenue Memorandum Order (RMO) No. 35-2002, as amended;
and may be released by the Bureau of Customs (BOC) without need of an ATRIG.
The BIR, however, may conduct a post investigation/audit on the importations
released by the BOC without ATRIG pursuant to these Regulations.
B. Income Tax Holiday and Exemption – For seven (7) years starting from the date
of registration and accreditation with the appropriate government agencies, such
as the DOE and the BOI, an RE manufacturer, fabricator, and supplier of RE
equipment shall be fully exempt from Income Taxes levied by the National
Government on net income derived only from the sale of RE equipment,
machinery, parts, and services.
C. Zero-Rated Value-Added Tax Transaction – All manufacturers, fabricators, and
suppliers of locally-produced RE equipment shall be subject to zero-rated VAT
on their transactions with local suppliers of goods, properties, and services needed
in the manufacture/fabrication of RE equipment; Provided, that the local suppliers
of goods, properties, and services shall require the manufacturers, fabricators, and
suppliers of locally-produced RE equipment the following documents for
purposes of future tax audit/refund:
i. BOI registrations of the manufacturer/fabricator/supplier and of the
recipient RE developer; and
ii. DOE registration/accreditation of the manufacturer/fabricator/ supplier and
of the recipient RE developer.
All individuals and entities engaged in the plantation of crops and trees used as
Biomass Resources shall be exempt from payment of VAT on all types of agricultural inputs,
equipment, and machinery within ten (10) years from the effectivity of the Act, subject to the
certification by the DOE and the conditions set forth in Section 7 of these Regulations:
Purchasers of RE equipment for residential, industrial or community use shall be
entitled to a rebate equivalent to the VAT passed on to the said purchasers. The rebate shall
only be available to purchasers who are not VAT-registered and shall be in the form of a tax
credit from the Income Tax liability of the purchasers during the year of purchase. Any
unutilized rebate or tax credit shall be forfeited.
Unless otherwise provided by law, the registration/accreditation to avail of incentives
under the Act shall disqualify the availment of other tax and non-tax incentives under the NIRC,
as amended by Republic Act (RA) No. 11534 (Corporate Recovery and Tax Incentives for
Enterprises or CREATE Act).
RE developers and manufacturers, fabricators, and suppliers of locally-produced RE
equipment availing the incentives provided for in the Act shall comply with the filing and
reportorial requirements under RA No. 11534 (CREATE Act). Non-compliance with the filing
and reportorial requirements shall be meted with the penalties under the law.