The primary regulatory measure aimed toward energy-saving measures in buildings is the EECA and its related regulations. The aim of the EECA is to establish a framework for introducing and institutionalizing fundamental policies on energy efficiency and conservation, including the promotion of efficient and judicious utilization of energy, increase in the utilization of energy efficiency and renewable energy technologies, and the delineation of responsibilities among various government agencies and private entities.
Under Section 25 of the EECA, energy efficiency projects,1 upon certification by the DOE, shall be included in the annual investment priorities plan of the Board of Investments (BOI) and shall be entitled to the incentives provided under Executive Order No. 226, otherwise known as the “Omnibus Investments Code of 1987,” as amended, and any other applicable laws for 10 years from the effectivity of the EECA. After the above-mentioned period, the inclusion of energy efficiency projects in the annual investment priorities plan shall be reviewed and may be extended by the BOI.
In this regard, energy efficiency and conservation projects are among the activities classified as Tier II priority projects under the 2022 Strategic Investment Priority Plan (SIPP). Incentives granted under the SIPP include Income Tax Holidays (ITH), enhanced deductions (ED) and a preferential special corporate income tax rate of 5% (SCIT). Incentives under the SIPP typically begin as ITHs of four to seven years, followed by five to 10 years of either SCIT or ED. The period of the incentive is determined by several factors, including the tier assigned to the activity, whether the activity is for export or for the domestic market, and whether the investment is made in the location of the investment involved.
[1] “Energy efficiency projects” refer to projects designed to reduce energy consumption and costs by any improvement, repair, alteration or betterment of any building or facility, or any equipment, fixture or furnishing to be added to or used in any building, facility or vehicle, including the manufacturing and provision of services related thereto. This is provided that such projects shall be cost-effective and shall lead to lower energy or utility costs during operation and maintenance.