Government grants tax incentives to ‘green’ business enterprises

“Green” business enterprises can enjoy tax incentives from the government starting May 1, 2019, after the Bureau of Internal Revenue (BIR) published the guidelines for the availment of such perks under a law signed last 2016.

Finance Secretary Carlos G. Dominguez III and Internal Revenue Commissioner Caesar R. Dulay issued the BIR Revenue Regulations (RR) No. 5-2019 which implements the tax provisions of Republic Act (RA) No. 10771 or the Philippine Green Jobs Act of 2016.

The law described “green” business enterprises as those engaged in climate change mitigation, green building practices, green technologies, production and provision of green goods and services, and projects that promote the green economy and sustainable development as well as create green jobs.

The business enterprises applying for this incentive needed to be first certified by Climate Change Commission Secretary. Then, they must register or update their registration with their Revenue District Office (RDO) by submitting the certification from the Climate Change Commission.

According to RR 5-2019, a qualified business enterprise under RA 10771 “shall be entitled to a special deduction from the taxable income equivalent to 50 percent of the total expense for skills training and research development expenses”, subject to the following conditions:

1. The deduction shall be availed of in the taxable year in which the expenses have been paid or incurred;
2. The taxpayer can substantiate the deduction with sufficient evidence (e.g. official receipts, delivery receipts and other adequate records) –

• The amount of expenses being claimed as deduction;
• The direct connection or relation of the expenses incurred for skills training and research development of the business enterprise;

3. Such special deduction shall be over and above the allowable, ordinary and necessary business deductions for said expenses under the Tax Code, as amended.

Guidelines and procedures for the availment of the tax incentive were provided in the RR. You may access the full version of the RR through the BIR website.