Expanded tax breaks for e-vehicles to spur 'more sustainable investments' - Recto

Finance Secretary Ralph Recto has welcomed the expansion of coverage of an executive order that temporarily grants tax breaks on the importation of certain electric vehicles, parts, and components.

In a statement on Wednesday, Recto said the National Economic and Development Authority Board’s decision to expand the electric vehicle incentive program under Executive Order (EO) 12 “will further enhance the ease of doing business in the Philippines, advance the country’s climate ambitions by promoting more sustainable investments, and generate more jobs in the area of green technology for Filipinos.”

“This strategic move puts the Philippines at the forefront of green technology, attracting more sustainable investments. It will spur the creation of high-quality jobs, foster innovation, and offer Filipinos more eco-friendly vehicle choices. Ultimately, it will bring us closer to reaching our goal of reducing greenhouse gas emissions by 75% in 2030,” the Finance chief said.

On May 15, the NEDA Board, chaired by President Ferdinand Marcos Jr., approved the expansion of tariff exemptions on electric vehicles to include e-motorcycles, e-bicycles, nickel metal hydride accumulator batteries, e-tricycles, hybrid electric vehicles (HEVs), and plug-in hybrid electric vehicles (PHEVs) jeepneys or buses.

The tariffs on these articles shall be at 0% until 2028.

Tariff exemptions also include electric vehicle parts and components and completely knocked down (CKD) EVs, which he said could incentivize interested parties to assemble or even manufacture in the Philippines, deepening the manufacturing sector and generating quality employment.

The Committee on Tariff and Related Matters (CTRM) will conduct an annual review of the rates to ensure that they are timely, applicable, and considerate of the sectors affected by the changes in duties on EVs.

The President originally signed EO 12 in January 2023, removing tariffs on EVs and their parts for five years. 

However, EO 12 did not include e-jeepneys, e-buses, e-tricycles, or e-quadricycles. 

With the expanded measure, Recto said EVs will be more accessible and affordable to consumers, accelerating the country’s transition to environment-friendly transportation solutions.

He added that the incentives are expected to attract more investors to establish operations in the Philippines, covering manufacturing, research and development, and infrastructure development in the EV industry. 

This influx of investment is anticipated to boost government revenues and create green jobs, further solidifying the Philippines' position as a leading manufacturing hub in Asia, according to Recto.

Apart from the expanded EO 12, the government has also implemented reforms to attract more investments in the EV sector.

Under the Electric Vehicle Industry Development Act (EVIDA), which took effect in April 2022, EV owners enjoy exemptions from “number-coding” road congestion measures and are given priority registration and renewal with the Land Transportation Office (LTO). 

EVs are also given a 30% excise tax discount on motor vehicle user charges, while hybrid vehicles are granted 15% off. 

EVs are also issued a special type of license plate under the law. 

Likewise, the Tax Reform for Acceleration and Inclusion (TRAIN) Act, which was first implemented in 2018, provided tax incentives for EVs. 

Hybrid vehicles are subject to 50% of the applicable excise tax rates on automobiles, while purely electric vehicles are exempt from excise tax.

Recto said this was complemented by the 2022 Strategic Investment Priority Plan (SIPP), which identified green ecosystems, including EV-related activities, for investment incentives.

Moreover, the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act identifies incentives for the registered business enterprise activities covered in the SIPP, including an income tax holiday spanning four to seven years and a special corporate income tax rate of 5%.

Amendments to the CREATE Act are underway to improve the country’s tax incentive policy and administration and further tailor the interests of investors in strategic investments.

“All of these reforms are a testament to the President's commitment to rolling out a red carpet for investors and the Philippines’ strong resolve to create a vibrant and sustainable EV ecosystem. The policy environment for investments in the country has never been more open and liberalized than it is now,” Recto said. —VBL, GMA Integrated News