Save the Earth, save on taxes
How can business enterprises save the earth and at the same time save on and implement a tax efficient administration?
In many ways, I would say. Businesses can pave the road by supporting the creation of jobs linked to the preservation of the environment. Businesses can also adopt practices developed to prioritize resource management efficiency and implement changes, such as shifting from plastic to paper-based products, or transitioning from paper-based systems to digitalization.
In fact, under the recently issued Revenue Regulations No. 8-2022 and No. 9-2022, businesses engaged in the export of goods and services, or in electronic commerce, and those registered under the large taxpayer’s service, have been required to issue electronic receipts or sales/commercial invoices.
Also, as early as April 2016, Republic Act No. 10771, otherwise known as the Philippine Green Jobs Act of 2016 was signed into law. The Law was enacted to encourage businesses, including self-employed or own-account workers, micro, small, and medium enterprises (MSMEs) which are involved in the agriculture, industrial and services sector, and community-based business enterprises and cooperatives, to transition into developing business practices that promote sustainable development.
The Green Jobs Act defined the term sustainable development as one that meets the needs of the present generation without compromising the ability of the future generations to meet their own needs. The Law introduced the concepts of: Green Jobs, Green Building Practices, Green Economy, Green Goods and Services, and Green Technologies in the Philippines.
Under Section 5 of the Green Jobs Act, businesses which qualify will be entitled to avail of fiscal incentives, specifically: (1) a special deduction from taxable income equivalent to 50% of the total expenses for skills training and research and development expenses which is over and above the allowable ordinary and necessary expenses under the Tax Code; and (2) tax and duty free imports of capital equipment which is actually, directly, and exclusively used in the promotion of Green Jobs. Apart from these fiscal incentives, the law also required different departments of government to encourage businesses to attain the objectives set out by the Green Jobs Act. For instance, the Department of Science and Technology (DoST) is tasked to provide a range of business development support to MSMEs. Government financial institutions were likewise instructed to provide preferential financial packages to qualified businesses.
In 2017, the Department of Labor and Employment (DoLE) issued Department Order No. 180, S. 2017 implementing rules and regulations for the Philippine Green Jobs Act. The order clarified that businesses must be certified “green” pursuant to a Certification Standards to be developed by the Climate Change Commission (CCC) to avail of fiscal incentives under the law.
In 2019, the Department of Finance, upon the recommendation of the Commissioner of Internal Revenue, issued Revenue Regulations No. 05-2019. The regulations provide that businesses duly certified by the CCC qualify for the tax incentives.
However, to date, the certification standards have not yet been issued by the CCC. Thus, qualified businesses have yet to enjoy the tax incentives granted under the Green Jobs Act. It is observed that the Annual Accomplishment Reports of the CCC from 2017, 2018, 2019, and 2020 only made mention of the Green Jobs Act in passing.
While it has been more than six years since the Green Jobs Act was passed, we remain hopeful that businesses which are qualified will soon enjoy the fiscal incentives granted under the Green Jobs Act. Certainly, businesses can consider these matters as they evolve and implement sustainable development practices as they further flourish in their industries while they save on and implement tax efficient administration systems at the same time.
The views and opinions expressed in this article are those of the author. This article is for general information and educational purposes, and not offered as, and does not constitute, legal advice or legal opinion.
Kevin B. Lumbre is an associate of the Tax department of the Angara Abello Concepcion Regala Cruz Law Offices.
