Guidelines for Tax Incentives under Clean Air Act

Applies to industries required to install pollution control devices or retrofit existing facilities to reduce air pollution.
Compliance required with air quality standards set under the Act and its Implementing Rules and Regulations (IRR).

"Act": Republic Act No. 8749, Philippine Clean Air Act of 1999.
"Air Emission": Any measurable contaminant or pollutant emitted into the atmosphere.
"BIR": Bureau of Internal Revenue.
"Department": Department of Environment and Natural Resources (DENR).
"EMB": Environmental Management Bureau of DENR.
"Incentives-Administering Agency": Includes Board of Investments, Philippine Economic Zone Authority, Department of Finance, Subic Bay Metropolitan Authority, Clark Development Corporation, and other special economic zone authorities.
"Industry": Group of establishments engaged in similar activities; "Establishment" refers to an enterprise or part thereof at a single location.
"IRR": DAO 2000-81, the Implementing Rules and Regulations of the Act.
"Mechanisms that Reduce Pollution": Systems or equipment that lower emissions to comply with standards.
"NIRC": National Internal Revenue Code of 1997.
"Permit to Operate (P/O)": Authorization from EMB to operate pollution control installation for a specific period.
"Pollution Control Device": Machinery or apparatus used to prevent or control air pollution within legal standards.
"Qualified Enterprise": Entity duly organized under Philippine laws that installs or retrofits pollution control devices and holds a valid P/O from EMB.
"Retrofit": Upgrading or adding facilities to reduce emissions.
"Special Economic Zones": Designated areas focused on industrial, commercial, or tourism development with fixed boundaries.

Available only to qualified enterprises complying with emission standards and possessing a valid P/O.

Accelerated Depreciation: Deduction for wear and tear or obsolescence of installed pollution control devices; methods allowed include straight-line, declining-balance, sum-of-the-years-digit, or others prescribed.
Deductibility of Research and Development Expenditures: Deduction for expenses on research related to pollution reduction mechanisms.
Tax Credits: Input VAT on purchases or imports of pollution control devices, supplies, and materials is creditable against output tax; governed by Sections 110(B) and (C) of NIRC.

Machinery and equipment used for pollution control are exempt from real property tax per Section 234(e) of the Local Government Code.

Qualified enterprises in special economic and freeport zones follow the rules of respective incentives-administering agencies regarding tax benefits.

Secure Permit to Operate (P/O) from EMB following its procedures.
Attach certified true copy of P/O to annual income tax returns for accelerated depreciation and R&D deductions.
Attach P/O to claim for real property tax exemption with local assessor’s office.
P/O is valid only for the taxable year for which incentives are claimed.

EMB conducts inspections to verify proper installation and use of pollution control devices.
Qualified enterprises must provide sampling test results or computations signed by an EMB-accredited Pollution Control Officer.
Proof of compliance is the responsibility of the emission source owner; EMB may independently verify.

Fraudulent claims, false information, improper records, or misuse of pollution control devices to wrongfully avail tax benefits subject offenders to penalties under Title X of NIRC.
Additional prosecution possible under other applicable laws, including Section 47 of the Clean Air Act.

The Administrative Order takes effect 15 days after publication in a national newspaper and upon receipt by the Office of the National Administrative Register (ONAR).