THE Departments of Energy (DOE) and Finance (DOF) on Wednesday formalized a joint memorandum circular that allows qualified electric cooperatives (ECs) to seek tax exemptions from local government units (LGUs).
Energy Secretary Raphael Lotilla and Finance Secretary Ralph Recto, represented by Finance Undersecretary Bayani Agabin, signed the circular which provides guidelines for electric cooperatives on the availing of preferential rights under Republic Act (RA) 7160 (Local Government Code) in relation to RA 10531 (An Act Strengthening the National Electrification Administration).
The circular says all ECs in the country, whether registered with the National Electrification Administration (NEA) or through the Cooperative Development Authority (CDA), which comply with NEA’s financial and operational standards, are exempted from local taxes, fees, and charges imposed by LGUs.
The ECs are expected to maintain high collection efficiency, achieve a positive net worth, meet systems reliability and systems loss standards, conduct annual general membership assemblies and district elections as scheduled, implement electrification projects to attain 100-percent customer connection and submit complete and timely reportorial requirements to the NEA.
ECs must likewise secure an annual certificate of compliance from the NEA demonstrating their adherence to the prescribed financial and operational standards. Moreover, the ECs must achieve at least a 75-percent rating based on NEA’s compliance parameters.
“This local tax exemption is a significant milestone for qualified ECs, as it directly translates to reduced financial burdens that can be reinvested into improving services and achieving 100-percent total electrification,” Lotilla said.
“By reducing these costs, we empower them to focus on expanding access to electricity, especially in unserved and underserved areas, ensuring no Filipino household is left behind.”
The DOE clarified the term “local taxes” means taxes or enforced contributions imposed by an LGU in provinces, cities, municipalities and barangays through an ordinance, such as real property tax, business tax, franchise tax, and tax on transfer of real property ownership.
ECs, however, are still subject to regulated and reasonable administrative costs in accordance with Joint Memorandum Circular (JMC) 2019-01 signed by the Department of the Interior and Local Government (DILG) and DOF.
These costs include fees for business permits, mayor’s permits, barangay clearances, community tax certificates, and other charges like water consumption, electricity and toll fees.
The NEA and the Philippine Rural Electric Cooperatives Association Inc. (PHILRECA) lauded the signing of the circular, saying it addresses crucial gaps in ECs’ finances and will help enable them to access certain tax privileges and incentives, which, in turn, benefits stakeholders.
“This development proves the government’s commitment to fostering equitable financial support to all ECs, without distinction, while ensuring their compliance with operational standards,” NEA administrator Antonio Mariano Almeda said in a statement.
“We at PHILRECA welcome today’s signing of JMC, which aims to provide guidance to LGUs on the availing of preferential rights of electric cooperatives,” PHILRECA Executive Director and General Manager Janeene Depay-Colingan said.
Under the JMC, the Bureau of Local Government-Finance is responsible for the dissemination of the circular to LGUs through local treasurers for proper implementation, and monitoring the compliance of LGUs, as well as providing technical assistance to LGUs.
Meanwhile, the DOE will assist in the dissemination of the JMC through its field offices, conduct a review of the JMC in coordination with the Bureau of Local Government Finance (BLGF), and recommend amendments.
NEA, on the other hand, will issue and disseminate guidelines on the financial and operational standards for the issuance of certificates of compliance for the availing of the preferential rights of ECs within 15 days from the effectivity of the JMC.
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