Bureau of Local Government Finance Opinion

July 16, 2015 BUREAU OF LOCAL GOVERNMENT FINANCE OPINION 2nd Indorsement Respectfully returned to the Regional Director for Local Government Finance, Region I, San Fernando City, La Union, the herein letter of the Provincial Treasurer of La Union, relative to the newly assessed 1.0 MW Biomass Power Generation Plant and 23 MW Bunker Fired Power Plant, located at Brgy. Udiao, Rosario and Brgy. Quirino, Bacnotan, La Union, respectively. The letter is seeking clarification as to the specific taxes and fees that the Province and the Municipalities of Rosario and Bacnotan, may impose, aside from the real property taxes on these businesses or entities. On the basis of the documents submitted it appears that SurePEP, Inc. per DOE Certificate of Registration No. RE-B2011-02-038 dated February 25, 2011 is registered as an RE Developer of Biomass Energy Resources located in the Municipality of Rosario, La Union. There are no documents submitted with respect to the 23 MW Bunker Fried Power Plant located in Bacnotan of the same province. aCIHcD In this connection, it may be stated that Republic Act (ACT) No. 9513, otherwise known as the Renewable Energy Act of 2008 do not provide for any local tax privileges except for the special realty tax rate of 1.5%, provided under Section 15 of the Act. It is worth pointing however Section 6 of R.A. No. 9136, otherwise known as the Electric Power Industry Reform Act of 2001 (EPIRA), the pertinent portion of which is quoted as follows: SECTION 6. Generation Sector . . . . "Any law to the contrary notwithstanding, power generation shall not be considered a public utility operation. For this purpose, any person or entity engaged or which shall engage in power generation and supply of electricity shall not be required to secure a national franchise ." (Emphasis ours) In view of the aforequoted provision of the EPIRA, SurePEP is not liable for the payment of the local franchise tax to the province. Likewise the operator of the 23 MW Bunker Fired Power Plant is not liable for the payment of the said franchise tax. For the operation of a power plant, SurePEP, Inc. shall be subject to the local business tax pursuant to Section 143 of the LGC, as implemented under a duly-enacted ordinance to the municipality of Rosario having jurisdiction over the place where the generating plant is located based on the gross sales derived from the locality. For the same reason, the Municipality of Bacnotan, may likewise impose the business tax to the operator of the 23 MW Bunker Fired Power Plant located thereat. Be guided accordingly. (SGD.) SALVADOR M. DEL CASTILLO OIC-Executive Director