RMC No. 06-2015 — Publishes the full text of Executive Order No. 173 entitled "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 and/or -Controlled Corporations"

BUREAU OF INTERNAL REVENUE REPUBLIC OF THE PHILIPPINES DEPARTMENT.OF FINANCE Quezon City BUREAU OF INTERNAJ REVENUE RECORDS MGT. DTVSION RECEIVED 2:55*0.M: TAK 2 2 2015 a

January 6, 2015

REVENUE MEMORANDUM CIRCULAR NO._(6- 20/5

SUBJECT: Publishing the Full Text of Executive Order No. 173 Dated October 31, 2014, Entitled "Reduction and Condonation of Real Property Facilities of Independent Power Producers Under Build-Operate- Transfer Contracts with Government-Owned and/or -Controlled Taxes and Interest/Penalties Assessed on the Power Generation Corporations"

TO : All Internal Revenue Officials, Employees and Others Concerned

full text of Executive Order No. 173 dated October 31, 2014: For the information and guidance of all concerned, quoted hereunder is the

"MALACANAN PALACE MANILA

BY THE PRESIDENT OF THE PHILIPPINES

EXECUTIVE ORDER NO, 173

REDUCTION AND CONDONATION OF REAL PROPERTY TAXES AND INTEREST/PENALTIES ASSESSED ON THE POWER

GENERATION FACILITIES OF INDEPENDENT POWER PRODUCERS CONTRACTS -CONTROLLED CORPORATIONS WITH UNDER GOVERNMENT-OWNED BUILD-OPERATE-TRANSFER ANDIOR

WHEREAS, under Section 234 of Republic Act No. 7160 (Local Government Code of 1991), Government-Owned and/or --Controlled

power and machinery and equipment used for pollution control and electricity enjoy a number of exemptions/privileges with respect to real as well as an exemption for all machinery and equipment that are actually. property taxes, including an assessment ievel of 1o% on all its lands. Corporations (GocCs) engaged in the generation and transmission of buildings, machineries and other improvements (Sections 216 and 218) directly and exclusively used in the generation and transmission of electric

environmental protection;

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their property, machinery and equipment used in the generation and the position that Independent Power Producers (IPPs):operating within their territories which are not GOcCs are : not entitled to the exemptions/privileges of GOcCs with respect to real property taxes on distribution of electric power, and have threatened enforcement action against the IPPs, inciuding the levy and sale at public auction of the affected properties; WHEREAS, various Local Government Units (LGUs) have taken

the financial stability of the GOCCs, the government's fiscal consolidation GOcCs and carries the full faith of the National Government, threatens efforts, and the stability of energy prices: IPPs, some of which obligation have been contractually assumed by the WHEREAS, the payment of said real property taxes by the affected

by the LGUs concerned will trigger massive direct liabilities on the part of Management Corporation and other affected GOcCs, may increase the cost of electricity, and may trigger further cross-defaults and significant economic losses across all sectors; National Power Corporation/Power Sector Assets and Liabilities WHEREAS, the forcible collection of the subject real property taxes

President of the Philippines may, when public interest so requires, province or city or a municipality within the Metropolitan Manila area"; and condone or reduce the real property tax and interest for any year in any WHEREAS, under Section 277 of Republic Act No. 7160, "the

provides that the President shall have control of all the executive departments, bureaus, and offices. WHEREAS, Article VII, Section 17 of the Philippine Constitution

Republic of the Philippines, by virtue of the powers vested in me by law, do hereby order: NOW, THEREFORE, I, BENIGNO S. AQUINO II, President of the

to the tax due if computed based on an assessment level of fifteen percent tax, for all years up to 2014, are hereby reduced to an amount equivalent depreciated at the rate of two percent (2%) per annum, less any amounts already paid by the IPPs. All fines, penalties and interests on such levies accruing to the Special Education Fund) actually and directly used by IPPs for the production of electricity under Build-Operate-Transfer contracts (whether denominated Power Purchase Agreements, Energy Conversion Agreements or other contractual agreements) with GOcCs, assessed by LGUs and other entities authorized to impose real property (15%) of the fair market value of said property, machinery and equipment property tax on property, machinery and equipment (including any special SECTION 1. Reduction and Condonation. All liabilities for real DURFAU OF RABR*E RMVEURT RECORDS MT HVERON 3AK 2 2 20E 2:55 PM

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concerned iPPs are relieved from payment thereof. deficiency real property tax liabilities are also hereby condoned and the

government, including GOCCs and LGUs, are hereby ordered to strictly comply with this Executive Order. concerned SECTION 2. Compliance by Al! Government Entities. departments, agencies and instrumentalities of the Al

this Order are hereby repeaied, amended or modified accordingly. regulations or parts thereof which are inconsistent with the provisions of SEcTiON 3. Repealing Clause. All orders, issuances, rules and

remain valid and subsisting. declared invalid or unconstitutional, the other provisions unaffected shall SECTION 4. Separability Clause. If any provision of this Order is

immediately upon its publication in a newspaper of general circulation. SECTION 5. Effectivity Clause.This Order shall take effect

Our Lord, Two Thousand and Fourteen. DONE, in the City of Manila, this 31st day of October, in the year of

By the President.

(Sgd) PaQUITO N. OCHOA, JR Executive Secretary'

Circular a wide publicity as possible. All concerned are hereby enjoined to be guided accordingly and give this

O-5 Commissidner of Internal Revenue KIM S. JACiNTO - HENARES

BUAEAU QF INTERNAL REENUE 0 29 8 4 2 RECORDS MGT. DIVISION 22 20{5 2:55PM. MM9

RECEIVED