Fiscal Incentives - RA 9513 (Renewal Energy Act)

RA 9513 or the Renewable Energy Act of 2008 was enacted on December 11, 2008. It provides the framework of the government to acceleratethe exploration and development of renewable energy (RE) resources such as, but not limited to, biomass, solar, wind, hydro, geothermal and ocean energy
sources, including hybrid systems.

Through the adoption of sustainable energy development strategies, the government aims to achieve energy self-reliance and reduce the country’s dependence on fossil fuels and at the same time minimize the country’s exposure to price fluctuations in the international markets, the effects of which spiral down to almost all sectors of the economy.

RE developers, including hybrid and cogeneration systems as duly certified by the Department of Energy (DOE), in consultation with the BOI, shall be entitled to the following incentives:

1. ITH for seven (7) years; additional investments entitled to ITH not to exceed three (3) times the period of the initial availment;

2. Duty-free importation of RE machinery, equipment and materials within the first ten (10) years upon the issuance of a certification to an RE developer and subject to certain conditions;



3. Special realty tax rates on equipment and machinery not to exceed 1.5% of original cost less accumulated depreciation or net book value;

4. NOLCO for losses during the first three (3) years from start of commercial operation to be carried over as a deduction from gross income for the next seven (7) consecutive taxable years;

5. Corporate Tax Rate – After the ITH, all RE developers shall pay a corporate tax of ten percent (10%) on its taxable income, as defined in the NIRC, as amended, provided that the savings shall
be passed on to end-users in the form of lower power rates;

6. Accelerated Depreciation (AD) – If the RE project fails to receive an ITH before full operation, it may apply for AD through one of two methods: declining balance method or sum-of-the-years’
digit method;

7. Zero Percent VAT rate on the following:
a. sale of fuel or power generated from RE sources;
b. local supply of goods, properties, services needed for the development, construction and installation of plant facilities;
c. process of exploring and developing RE sources to its conversion into power, including, but not limited to the services of subcontractors and/or contractors;

8. Income tax exemption of proceeds from sale of carbon emission credits; and

9. Tax credit on domestic capital equipment and services equivalent to 100% of the VAT and customs duties that would have been paid for the importation, valid within the term of the operating contract.

For RE commercialization, all manufacturers, fabricators, and suppliers of locally-produced RE equipment and components duly recognized and accredited by the DOE shall, upon registration with the BOI, be entitled to the following incentives:

1. Tax- and duty-free importation of components, parts and materials subject to certain conditions;

2. Tax credit on domestic capital components, parts and materials equivalent to 100% of the taxes that would have been paid had these been imported ;

3. Income tax holiday for seven (7) years; and

4. Zero percent VAT on all transactions with local suppliers of goods, properties and services.

Farmers engaged in the plantation of biomass resources are also exempted from payment of the VAT on all types of agricultural inputs, equipment and machinery for a period of ten (10) years from the effectivity of RA 9513.

In addition, to encourage the adoption of RE technologies, the DOF, in consultation with the DOE, Department of Science and Technology (DOST) and Department of Trade and Industry (DTI), shall provide tax rebates for all or part of the tax paid for the purchase of RE equipment for residential, industrial or community use.