The Philippine Energy Efficiency Alliance (PE2) is hoping the improved incentive package under CREATE MORE law would attract more energy efficiency projects to secure Department of Energy endorsement and Board of Investment registration.
“Beyond own-use solar PV projects, we hope that third-party investments in EE projects involving space cooling, refrigeration, compressors, motors, drives, lighting and energy management technologies could grow with the catalytic effect of the CREATE MORE law.” PE2 president Alexander Ablaza said.
PE2 is a non-stock, non-profit organization of energy efficiency market stakeholders. Its members include Aboitiz Power Corp., Daikin, Engie Services Philippines, Globe, Manila Electric Co., Mitsubishi Corp., Schneider Electric, Siemens, Shell Companies in the Philippines, Daikin Airconditioning Philippines, among many others.
The BOI delivered a detailed presentation on the recently enacted Republic Act 12066 or the CREATE MORE Act and how its expanded fiscal incentives could benefit energy efficiency (EE) investments.
BOI director Elyjean Portoza for Legal and Compliance Service said during the PE2 membership meeting that the CREATE MORE law amends the various provisions of the National Internal Revenue Code (NIRC), the most significant of which is the reduction of the corporate income tax rate for registered business enterprises (RBEs) under the enhanced deduction regime (EDR) from the previous 25 percent to 20 percent.
She said the improvements of enhanced deductions under the new law: deduction on power expense increased from 50 percent to 100 percent; inclusion of tourism industries on deduction for reinvestment allowance until December 31, 2034; inclusion of 50 percent additional deduction on expenses relating to exhibitions, trade missions or trade fairs; and enhanced net operating loss carry-over (NOLCO) may be carried over as deduction within the next 5 consecutive years immediately following the last year of the income tax holiday (ITH) entitlement period.
The BOI official explained that CREATE MORE now enables a domestic market enterprise engaged in energy efficiency projects registered by an investment promotion agency such as BOI (e.g., energy service company (ESCO) or third-party project developer (TPPD)) to choose between the 4–7-year ITH plus 10 year EDR or 14–17 EDR to improve the commercial viability of the energy efficiency investment.Portoza also said ESCOs and TPPDs can avail of ITH incentives for simple and complex energy efficiency projects capable of delivering a minimum 15 percent energy savings measured at the defined project boundary.
The ITH incentive no longer applies to self-financed simple and complex energy efficiency projects. She clarified, however, that both self-financed projects under the Energy Efficiency Strategic Investments (EESI) category, such as waste heat recovery systems, own-use solar PV systems, or electric vehicle refleeting with charging stations, shall only be entitled to the ITH incentive and duty exemption on importation of capital equipment, raw materials, spare parts or accessories.
The ITH incentive shall be limited to the prescribed ITH entitlement period under the CREATE Act (4-7 years) or until the recovery of 50 percent of its capital investment, which excludes the cost of land and working capital of the registered energy efficiency project. On the other hand, ESCOs and TPPDs can benefit from the 100 percent ITH incentive for investments made under the EESI category.
