Tax Articles

Tax Incentives for Green Jobs

By Atty. Rodel C. Unciano

The blistering summer heat we are currently encountering reminds us of the importance of giving our share in protecting our environment as a responsible citizen.

In the Philippines, unknown to many, we have a law called the “Philippine Green Jobs Act of 2016” (Republic Act 10771), which recognizes the employment of green jobs as an important tool in preserving our environment by giving incentives to qualified business enterprises.

As defined under the law, green jobs refer to employment that contributes to preserving or restoring the quality of the environment, be it in the agriculture, industry or services sector. This includes jobs that help to protect ecosystems and biodiversity, reduce energy, materials and water consumption through high-efficiency strategies, decarbonize the economy and minimize, or altogether avoid, generation of all forms of waste and pollution. Green jobs are decent jobs that are productive, respect the rights of workers, deliver a fair income, provide security in the workplace and social protection for families, and promote social dialogue.

Under the law, qualified business enterprises that promote green jobs are entitled to a special deduction from the taxable income equivalent to 50% of the total expense for skills training and research development expenses. This special deduction is over and above the allowable ordinary and necessary business deductions for said expenses under the Tax Code, as amended.

In addition, a qualified enterprise may avail itself of a tax- and duty-free importation of capital equipment, provided that the capital equipment is actually, directly and exclusively used in the promotion of green jobs of the business enterprise.

In order to avail itself of the incentives, a qualified business enterprise has to register or update registration with the Bureau of Internal Revenue by submitting certification issued by the Climate Change Commission that the enterprise is qualified to avail itself of the incentives, pursuant to Revenue Regulations 5-2019 recently issued by the BIR. The registration has to be made with the BIR’s Revenue District Office (RDO) where the qualified business enterprise is registered.

Upon filing of the income tax returns/annual information returns, the availing enterprise shall furnish the RDO of a sworn list of the total expenses paid or incurred for skills training and research development during the year. Further, the enterprise is required to submit a sworn list of the activities and/or projects undertaken by the institution and the cost of each undertaking indicating in particular where and how the expenses were paid or incurred. Also, the qualified enterprise has to submit a sworn declaration that the expenses paid or incurred for skills training research development has a direct connection or relation to the activities and/or projects of the business enterprise that generate or sustain green jobs.

The deduction shall be availed of on the taxable year in which the expenses have been paid or incurred. The expenses can be substantiated with sufficient evidence, such as official receipts, delivery receipts and other adequate records showing the amount of expenses being claimed as deduction and the direct connection or relation of the expenses incurred for skills training and research development of the business enterprise.

The grant of tax incentives on “green jobs” is consistent with the State’s objective of preserving the environment, conserve natural resources for the future generation and ensure the sustainable development of the country and its transition into a green economy.