Tax Exemption Boosts Electric Co-ops, Rural Electrification

The Department of Finance (DOF) and the Department of Energy (DOE) signed a joint memorandum circular on December 4, 2024, granting tax exemptions to qualified electric cooperatives (ECs) to accelerate electrification efforts across the Philippines.

The agreement allows non-stock, non-profit ECs registered with the National Electrification Administration (NEA) and stock cooperatives under the Cooperative Development Authority (CDA) to seek exemptions from local taxes, fees, and charges imposed by local government units (LGUs).

“This is a major step towards achieving our goal of 100 percent total electrification in the country,” said Finance Secretary Ralph G. Recto, represented by DOF Undersecretary Bayani Agabin, during the signing. “The savings that qualified ECs gain from this initiative can be passed on to consumers.”

DOE Secretary Raphael Lotilla co-signed the circular, which outlines the process for ECs to avail of preferential rights under Republic Act No. 7160 (Local Government Code) and Republic Act No. 10531, also known as the NEA Strengthening Act.

The guidelines were developed in collaboration with key stakeholders, including the Philippine Rural Electric Cooperatives, the Association of Philippine Electric Cooperatives, and the Union of Local Authorities of the Philippines. The League of Cities of the Philippines also endorsed the initiative.

Under the circular, ECs must secure an annual certificate of compliance from NEA by meeting financial and operational benchmarks. These include a collection efficiency rate of at least 75%, positive net worth, compliance with systems reliability standards, and timely submission of reportorial requirements.

The DOE emphasized that these savings could lead to reduced electricity costs for consumers and more investment in reliable power supply, particularly in underserved areas.

“The savings will empower ECs to invest more in infrastructure and ensure reliable service for generations of Filipinos, especially in underserved communities,” Recto added.

The Bureau of Local Government Finance (BLGF) will oversee the dissemination and enforcement of the circular at the LGU level. BLGF will monitor compliance and provide technical assistance to local treasurers.

Meanwhile, NEA will issue guidelines on the compliance requirements for ECs, including operational standards for systems loss, collection efficiency, and electrification projects aimed at achieving universal service coverage.