PSALM welcomes the issuance of EO No. 117

30 Jul 2020

Pursuant to Republic Act No. 7160 or the Local Government Code of 1991, President Rodrigo Roa Duterte recently signed Executive Order (EO) No. 117, which reduces the 2019 real property tax (RPT) due on property, machinery and equipment used for production of electricity by independent power producers (IPPs) covered by build-operate-transfer contracts (BOTs) with government-owned or controlled corporations (GOCCs). Since the said RPT is contractually passed on to these GOCCs, EO 117 mandates the reduction of such RPT obligations.

PSALM is a counterparty to several of these BOTs with IPPs and is thus responsible for the payment of the RPT obligations on such property, machinery and equipment. PSALM became a counterparty when Republic Act No. 9136 or the Electric Power Industry Reform Act of 2001 (EPIRA) transferred to PSALM these BOT contracts from the National Power Corporation (NPC), including the responsibility to pay the RPT obligations.

With the recently issued EO 117, the RPT to be paid by PSALM for 2019 is reduced to an amount equivalent to an assessment level of fifteen percent (15%) of the fair market value of such property, machinery and equipment depreciated at a rate of two percent (2%) per year, less any amount already paid. Furthermore, all interests and penalties on such deficiency RPT are condoned. All RPT payments already made over and above the reduced RPT shall be applied to RPT for the succeeding years.

PSALM is extremely grateful to President Duterte for signing EO 117.

PSALM president and CEO Irene Besido Garcia says "With the issuance of EO No.117, PSALM's RPT obligations due for taxable year 2019 amounting to about P1.060 billion at 80% assessment rate would be reduced to about P198.805 million at 15% assessment rate. This translates to an estimated savings of P861.49 million for PSALM, which amount can therefore be utilized by PSALM for the payment of other maturing obligations assumed from NPC."

Contracts of PSALM with IPPs covered by EO No. 117 include contracts on Ilijan Natural Gas Power Plant, the Pagbilao Coal-Fired Thermal Power Plant, the Sual Coal-Fired Thermal Power Plant, the San Roque Hydro-Electric Power Plant and the Mindanao Coal-Fired Thermal Power Plant.