Question & AnswerQ&A (PRESIDENTIAL DECREE NO. 551)
The main purpose of Presidential Decree No. 551 is to lower the cost of electricity to consumers by reducing the franchise tax payable by electric franchise holders and the tariff on fuel oils used for power generation by public utilities.
The franchise tax is set at two percent (2%) of the gross receipts from the sale of electric current and related transactions, payable to the Commissioner of Internal Revenue.
The franchise tax shall be paid to the Commissioner of Internal Revenue or his authorized representative on or before the twentieth day of the month following the end of each calendar quarter or month, as provided in the franchise or local ordinance.
Yes, the two percent franchise tax is in lieu of all other taxes and assessments on earnings, receipts, income, and privileges related to the generation, distribution, and sale of electric current.
The tariff heading for petroleum oils used as fuel oils for electric power generation is reduced to a 10% ad valorem duty for electric utilities, while other uses remain at 20%.
A refund or tax credit of up to 50% of the duty imposed on such petroleum oils is allowed, subject to rules prescribed by the Commissioner of Customs with approval from the Secretary of Finance.
All savings must be passed on to the ultimate consumers to ensure that the cost reduction benefits the public.
Violators face a fine of not more than P50,000.00 and imprisonment of up to six months. The Secretary of Finance may also order compulsory price or rate reductions, which can be prospective or retroactive.
The manager or person in charge of the management of the business or affairs of the juridical person is personally responsible for the offense.
The decree took effect immediately upon its signing on September 11, 1974.
No, any provision of law or local ordinance to the contrary is superseded by this decree which mandates a franchise tax of two percent regardless of other laws.
The Secretary of Finance is responsible for promulgating rules, regulations, and a reporting system to implement the provisions of the decree.