Tax benefits to qualified investors possible, says DoJ

The Department of Justice (DoJ) on Sunday disclosed that the President has the authority to grant tax benefits, power rate discounts and other incentives to qualified investors for national economic development.

In a seven-page legal opinion dated 8 July 2025, Justice Secretary Jesus Crispin Remulla clarified that extending such support to preferred private entities does not violate the constitutional guarantee of the equal protection clause.

Remulla cited legal precedent, explaining that while the equal protection clause guards against undue favor and privilege, it does not demand absolute equality. Instead, it requires that all persons under similar circumstances and conditions be treated alike when conferring privileges and enforcing liabilities.

“It does not prohibit legislation that grants only privileges or incentives to persons falling within a specified class, if the law applies alike to all persons within such class, and reasonable grounds exist for making a distinction between those who fall within such class and those who do not,” Remulla said.

The DoJ’s legal opinion was issued at the request of Department of Finance (DoF) Secretary and Fiscal Incentives Review Board (FIRB) chairperson Ralph Recto.

Recto sought clarification on the President’s authority under Section 301 of the National Internal Revenue Code of 1997, or the Tax Code, to provide budgetary support to private entities undertaking “highly desirable projects.”

Section 301 specifically allows the President to “modify the mix, period or manner of availment of incentives provided under this Code or craft the appropriate fiscal and non-fiscal support package for a highly-desirable project or a specific industrial activity based on defined development strategies,” either “in the interest of national economic development, or upon the recommendation of the FIRB.”

In his letters dated 24 February 2025 and 7 May 2025, Recto disclosed that a private entity had applied for registration with the Philippine Economic Zone Authority (PEZA) and sought tax incentives for an investment project exceeding P50 billion.

The entity also requested non-fiscal support, including discounts on power expenses and transmission charges, water diversification, and the installation and construction of a substation.

Recto described the project as “novel and unprecedented” and informed the DoJ that the FIRB had endorsed it for presidential approval of both fiscal and non-fiscal incentives, pending the DoJ’s legal opinion.

He also conveyed his department’s position that the President possesses the authority to grant incentives to valuable projects even without a prior FIRB recommendation.

Upholding the finance secretary’s stance, Remulla stressed that while a prior FIRB recommendation is not mandatory, the President’s decision to grant incentives under Section 301 of the Tax Code must be guided by the FIRB’s determination of what constitutes a highly desirable project, the maximum incentive levels, and the performance targets to be imposed on the grantee.

The DoJ also concurred with Recto that the President may grant power discounts as non-fiscal incentives for preferred projects. It further suggested that the FIRB be guided by Republic Act 10667, or the Philippine Competition Act, to ensure that such incentives do not unfairly impact competition and trade by unduly favoring specific companies.

“The grant of incentives by the government to qualified investment constitutes a pact between the government and the company,” Remulla cited in the legal opinion. “On the part of the government, it is generally intended to enhance economic efficiency.”

He added that agreements contributing to economic progress may not necessarily be considered anti-competitive.