President Bongbong Marcos has ordered a reduction in real property taxes (RPT) imposed on independent power producers (IPPs) for 2025, citing the need to prevent potential defaults, higher electricity costs, and financial risks to government agencies backing IPP contracts.
Executive Order No. 106, issued on Nov. 28, lowers the RPT liabilities — including special levies for the Special Education Fund — on power generation facilities under build-operate-transfer (BOT) schemes and similar agreements with government-owned or -controlled corporations (GOCCs). The reduction applies to all RPT assessments issued by local government units (LGUs) and other authorized bodies for all years up to 2025.
Under the order, liabilities are “reduced to an amount equivalent to the tax due if computed based on an assessment level of 15% of the fair market value of said property, machinery and equipment, depreciated at the rate of 2% per annum, less any amount already paid by the IPPs.”
All interest and penalties on deficiency RPTs are also condoned, and any excess payments already made will be credited to future tax obligations.
Marcos tasked the Department of the Interior and Local Government, with the Department of Finance, to monitor LGU compliance, with a progress report due within six months.
The Local Government Code grants GOCCs engaged in power generation certain RPT privileges, but several LGUs have argued that IPPs do not qualify for these exemptions and have threatened measures such as levying and auctioning properties. While IPPs are responsible for their taxes, much of the cost is contractually assumed by Napocor and PSALM — obligations ultimately backed by the national government.
The directive warned that collecting RPTs assessed by some LGUs at up to 80% would risk “massive direct liabilities on the part of Napocor/PSALM, 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.”
With IPPs supplying an estimated 1,085 megawatts to the grid, the order emphasized that any shutdown or operational disruption could force the public to rely on more expensive power or suffer rotating outages.