RR No. 7-2022: Provides the policies and guidelines for the availment of tax incentives provided under the Renewable Energy Act of 2008

Key points

1. Registrations and certifications. RE developers and manufacturers, fabricators and suppliers of locally-produced RE equipment must register with the DOE and submit the DOE Certificate of Registration or Accreditation to the BIR. They must also register with the Board of Investments, and the BOI Certificate of ITH Entitlement must be attached to the annual ITR or the ITH may be forfeited for that year.
2. RE developer incentives. Developers get an Income Tax Holiday and NOLCO of the first three (3) years carried over for seven (7) consecutive years. After the ITH they pay 10% corporate tax, provided savings are passed on to end-users as lower power rates. Accelerated depreciation is available if no ITH is received, and the developer then can no longer avail of the ITH.
3. Zero-rated VAT and carbon credits. The sale of power or fuel from renewable sources, and ancillary services, is subject to 0% VAT. Local purchases for plant development, construction and installation are also 0% VAT, and proceeds from carbon emission credits are exempt from all taxes.
4. Hybrid and cogeneration systems. Incentives apply only in proportion to and to the extent of the RE component. The DOE certifies which equipment uses RE resources and the RE capacity in megawatts for common facilities.
5. Equipment manufacturers and suppliers. They get VAT-free importation of components, parts and materials without an ATRIG, though the BIR may post-audit. They also get an income tax exemption for seven (7) years on net income from sales of RE equipment, machinery, parts and services, and zero-rated VAT on local purchases.
6. Other rules. Biomass plantation inputs are VAT exempt within ten (10) years from the Act’s effectivity, subject to DOE certification. Non-VAT-registered buyers of RE equipment for residential, industrial or community use get a rebate equal to the VAT passed on, as an income tax credit, and unused rebate is forfeited. Registration under the Act disqualifies other NIRC or CREATE incentives unless law provides otherwise.

Who is affected

• Renewable energy developers
• Manufacturers, fabricators and suppliers of locally-produced RE equipment
• Individuals and entities growing biomass crops and trees
• Purchasers of RE equipment

Deadlines and effectivity

• Seven (7) years of income tax exemption for RE equipment manufacturers, fabricators and suppliers
• Biomass input VAT exemption within ten (10) years from effectivity of the Act