On December 3, 2025, through Executive Order 106, President Ferdinand Marcos Jr. once again extended the tax relief to Independent Power Producers (IPPs) operating under Build-Operate-Transfer (BOT) agreements with the government-owned or controlled corporations. This step by the President was deemed a continuation of the policy reinstituted earlier in the year under Executive Order 83, which provided the same relief for 2024.
What does the Executive Order do?
Under the E.O. 106, all real property tax (RPT) liabilities for the calendar year 2025, including those special levies for the Special Education Fund on properties, machinery, and equipment actually and directly used by IPPs for the generation of electricity under BOT or similar contracts, will be reduced.
The reduction is set at 15% of the fair market value of the said property, machinery, or equipment, depreciated at 2% per year, which is far lower than the 80% maximum assessment level of some Local Government Units (LGUs) that have been applying. Apart from this, all interests and penalties, which are deemed as Deficiency RPT Liabilities, are condoned. Hence, IPPs no longer have an obligation to settle those amounts. Moreover, any RPT payments made in 2025 exceeding the reduced amount may be credited against their future RPT liabilities.
Impact Beyond Power Companies
The government also explained the reasons behind this Executive Order. Many IPPs may face financial threats or defaults due to massive 2025 tax bills.
The affected IPPs under BOT contracts account for a substantial portion of the electrical grid’s capacity, with EO 106 indicating that around 1,085 megawatts are at stake. With this, a tax burden calculated at 80% of fair market value would have been considered a massive direct liability on the government through GOCCs such as NAPOCOR, forcing IPPs to withdraw or disrupt their operations. Therefore, it could increase the risk of power shortages and rotating outages or lead to higher electricity prices as supply becomes more difficult to maintain.
As IPPs receive tax relief on interests and penalties from the government through NAPOCOR, the measures avoid potential crippling liabilities that could arise if LGUs tried to collect the full RPT from IPPs under the 80% assessment level.
Notably, this is not the first time that such relief has been granted for their industry. Previous administrations, including under Duterte’s presidency, have issued EOs to lower or condone RPT for IPPs under BOT contracts. The repetitive use of this executive function has been deemed as a recognition that heavy tax burdens on power plants can pose a significant threat to the stability of long-term energy.
Potential Issues to Consider
The policy on property tax treatment for Independent Power Producers (IPPs) has sparked various criticisms and raised essential questions among stakeholders. While intended to support the continued operation of IPPs and ensure a stable electricity supply, the approach may affect local government revenues, tax fairness, and public accountability.
- Fairness to LGUs – some local governments, often reliant on property taxes, may argue that this could set a precedent that undermines their financial capacity and service delivery.
- Transparency & Valuation – the assessment of RPT at 15% of fair market value, with depreciation applied, leaves room for subjectivity and is open to manipulation in determining it.
- Moral Hazard Risk – if condonation for the IPPs becomes a regular policy, it may encourage complacency, potentially rewarding them for deferred tax payment or poor compliance.
- Public Accountability – given that electricity is essential to the public, any risks that could occur will lead to inadvertent consequences. Therefore, the public has a legitimate interest in how these tax deals are structured and implemented.
What remains to be seen is whether some LGUs will challenge the EO, whether IPPs will remain operational as intended, and just how much of the “forgiven” tax burden will ultimately be borne by the national government, which could affect future fiscal planning.
All Things Considered
For the benefit of the general public, the President’s decision matters. A stable electricity supply and manageable costs are essential for firms and households. If IPPs were forced to be disrupted due to high tax costs, it could trigger a “domino effect” on power bills, inflation, and outages. On the other hand, granting tax breaks to big companies may draw criticism, especially from small taxpayers or LGUs that don’t enjoy the same relief.
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