Executive Order No. 126




MALACAÑAN PALACE MANILA BY THE PRESIDENT OF THE PHILIPPINES [ EXECUTIVE ORDER NO. 126, March 04, 2021 ] REDUCTION AND CONDONATION OF REAL PROPERTY TAXES AND INTEREST/PENALTIES ASSESSED ON THE POWER GENERATION FACILITIES OF INDEPENDENT POWER PRODUCERS UNDER BUILD- OPERATE-TRANSFER CONTRACTS WITH GOVERNMENT-OWNED OR -CONTROLLED CORPORATIONS WHEREAS, under Sections 218(d) and 234 of Republic Act (RA) No. 7160 or the "Local Government Code of 1991," government-owned or -controlled corporations (GOCCs) engaged in the generation and transmission of electricity enjoy a number of exemptions and privileges with respect to real property taxes (RPT), including an assessment level of 10% on all its lands, buildings, machineries and other improvements, as well as an exemption for all machinery and equipment that are actually, directly and exclusively used in the generation and transmission of electric power, and machinery and equipment used for pollution control and environmental protection; WHEREAS, various local government units (LGUs) have taken the position that Independent Power Producers (IPPs) operating within their territories, which are not GOCCs, are not entitled to the exemptions and privileges of GOCCs with respect to RPT on their property, machinery and equipment used in the generation and distribution of electric power, and have threatened enforcement action against IPPs, including the levy and sale at public auction of the affected properties; WHEREAS, since a substantial portion of RPT being assessed have been contractually assumed by the National Power Corporation/Power Sector Assets and Liabilities Management Corporation and carry the full faith and credit of the National Government, the collection of the RPT by the LGUs concerned will trigger massive direct liabilities on the part of such GOCCs, thereby threatening their financial stability, the government's fiscal consolidation efforts, the stability of energy prices, and may even trigger further cross-defaults and significant economic losses across all sectors; WHEREAS, as the operations of affected IPPs contribute largely to tax revenues for the National Government and LGUs, and provide grid capacity of around 3,100 megawatts, their closure or non-operation will entail substantial losses to the Governmetit and force resort to more costly electric power source alternatives "or the implementation of rotating power outages; WHEREAS, under Section 277 of RA No. 7160, the President may, when public interest so requires, condone or reduce the RPT and interest for any year in any province or city or a municipality within the Metropolitan Manila Area; and WHEREAS, Section 17, Article VII of the 1987 Constitution provides that the President shall have control over all executive departments, bureaus and offices; NOW, THEREFORE, I, RODRIGO ROA DUTERTE, President of the Philippines, by virtue of the powers vested in me by the Constitution and existing laws, do hereby order: Section 1. Reduction and Condonation. All liabilities for RPT, including any special levies accruing to the Special Education Fund, for calendar year (CY) 2020, on property, machinery and equipment actually and directly used by IPPs for the production of electricity under a Build-Operate-Transfer scheme and similar contracts, whether denominated Power Purchase Agreements, Energy Conversion Agreements or other contractual agreements, with GOCCs, assessed by LGUs and other entities authorized to impose RPT for all years up to CY 2020, are hereby reduced to an amount equivalent to the tax due if computed based on an assessment level of fifteen percent (15%) of the fair market value of said property, machinery and equipment depreciated at the rate of two percent (2%) per annum, less any amount already paid by the IPPs. All interests and penalties on such deficiency RPT liabilities are hereby condoned and the concerned IPPs are relieved from payment thereof. Section 2. Application to Future RPT Liabilities. All RPT payments made by the IPPs over and above the reduced amount under Section 1 of this Order shall be applied to their RPT liabilities for the succeeding years. Section 3. Compliance by all Government Entities. All concerned departments, agencies and instrumentalities of the government, including relevant GOCCs and LGUs, are hereby directed to strictly comply with this Order. Any violation of this Order shall be dealt with in accordance with civil service laws and regulations. Section 4. Repeal. All rules and regulations, or parts thereof which are inconsistent with the provisions of this Order are hereby revoked, amended or modified accordingly.ℒαwρhi৷ Section 5. Separability. If any provision of this Order is declared invalid or unconstitutional, the other provisions unaffected thereby shall remain valid and subsisting. Section 6. Effectivity. This Order shall take effect immediately upon its publication in the Official Gazette or a newspaper of general circulation. DONE, in the City of Manila, this 4 th day of March the year of Our Lord, Two Thousand and Twenty One. (SGD.) RODRIGO ROA DUTERTE By the President: (SGD.) SALVADOR C. MEDIALDEA Executive Secretary The Lawphil Project - Arellano Law Foundation