Understanding tax breaks and incentives for EV Buyers in the Philippines

Driving an electric vehicle is a statement in itself; not only does it reflect the owner’s positive attitude and trust toward adaptation of new technologies but effort to save the environment (no fuel money, pun intended). Whatever be it case, EVs are good for the environment, and with the changing climatic conditions, it is the least a car buyer can do. As for the government and its efforts towards EV adaptation, work is being done. What is it, you ask?

Well, the Philippines government is actively encouraging the adoption of electric vehicles (EVs) through a series of tax breaks and incentives. All are designed to promote cleaner transportation and align with the country’s environmental and economic goals. Thus making EVs more affordable and allowing the EV industry to grow.

In this article, we’ll be discussing the different tax breaks and incentives for EV buyers in the Philippines. But before that, here are a few points that will convince a sceptic to go for an electric car rather than a conventional ride.

Benefits of buying an EV

Switching to electric vehicles in the Philippines offers numerous advantages beyond tax incentives. The list includes -

Environmental benefits

EVs produce zero tailpipe emissions, significantly reducing air pollution and greenhouse gases. For a country like the Philippines, prone to climate-related disasters, this shift supports global and local climate goals.

Lower operating costs

While EVs may have a higher initial price, they save owners money in the long term. Electricity is cheaper than gasoline, and EVs have fewer moving parts, which reduces maintenance costs. These savings can offset the upfront investment within a few years

Improved energy security

By transitioning to EVs, the Philippines can reduce its reliance on imported fossil fuels. This supports energy security and reduces vulnerability to fluctuating global oil prices

Advanced features

EVs are often equipped with the latest technology, such as regenerative braking, autonomous driving capabilities, and advanced connectivity. These features provide an enhanced driving experience and support safer and more efficient mobility.

Enhanced public image

For businesses, adopting EVs enhances corporate social responsibility and demonstrates a commitment to sustainability. This can attract environmentally conscious customers and investors.

Tax incentives for EV buyers in the Philippines

Convinced that buying an EV is beneficial, if not, then the following tax incentives will change your mind.

Excise tax exemption	Under the Tax Reform for Acceleration and Inclusion (TRAIN) Act, pure electric vehicles are exempt from excise taxes, resulting in substantial savings for buyers. This is a key measure to address the higher upfront cost of EVs compared to traditional vehicles. Hybrid EVs, on the other hand, benefit from a reduced excise tax rate of 50%, further incentivising greener alternatives
Import duty waivers	Executive Order (EO) No. 12 eliminated import tariffs on EVs and their components for five years starting in 2023. This includes exemptions for fully assembled vehicles, e-motorcycles, and EV parts.
Income tax deductions	Individuals and businesses that purchase EVs can avail of income tax deductions. Thus encouraging enterprises to adopt environmentally responsible transportation fleets
Reduced registration fees	Electric vehicle owners benefit from significantly reduced annual vehicle registration fees.
Traffic exemptions	EVs are exempt from "number coding" schemes, allowing owners unrestricted use even on high-traffic days. This is particularly advantageous for city dwellers and businesses reliant on daily commutes.

 

Incentives for EV businesses & manufacturers

EVs not only bring tax benefits and incentives not only for buyers but also for manufacturers and related businesses. Let’s check out the perks -

Tax holidays	Under the Strategic Investment Priority Plan (SIPP), businesses involved in EV manufacturing, assembly, or charging infrastructure development can access tax holidays of up to seven years.
Preferential rates	The Corporate Recovery and Tax Incentives for Enterprises, commonly known as the CREATE Act offers reduced corporate income tax rates, further encouraging local production.
Infrastructure investment incentives	The government actively supports the development of EV charging infrastructure, offering grants and tax breaks to private companies and local governments investing in charging stations.
Green job creation	A thriving EV industry generates green jobs, be it working in vehicle assembly or infrastructure development.

Step-by-step guide to avail EV tax incentives

For individuals and businesses aiming to capitalise on the government’s tax breaks for electric vehicles (EVs) in the Philippines, following a structured approach is suggested.

Step 1. Research eligible electric vehicles

The first step is identifying which EV models qualify for tax incentives. Not all EVs may fall under the approved categories for exemptions or deductions, especially hybrid models. You can get help from government sites Department of Energy (DOE) or the Bureau of Internal Revenue, and authorised dealers selling EVs.

Step 2. Understand tax exemptions

It is a good idea to familiarise yourself with the applicable tax breaks, such as excise tax exemptions, import duty waivers, and reduced registration fees. In the case of importing EVs, be sure to check the documentation requirements for claiming the zero-import tariff.

Step 3. Consult professionals

Things can get tricky with all the government terms and conditions, therefore, it is suggested to bring a tax advisor. It will ensure eligibility and compliance with the rules by -

• Clarify the buyer's eligibility for deductions, such as income tax credits
• Assistance with filing necessary paperwork for registration and claiming incentives.

Step 4: Partner with accredited dealers

Choosing a certified dealer ensures your EV is recognised under the incentive programs. Further, such dealers can help with proper documentation for tax claims, assist with EV warranty and maintenance, and ensure you meet requirements for government registration.

Challenges in EV adoption in the Philippines

Despite the numerous incentives, EV adoption in the country faces certain challenges that need to be addressed.

• Limited charging infrastructure
  The need for charging stations in rural and urban areas makes long-distance EV travel challenging.
• High upfront cost
  Although incentives lower the costs, EVs are still generally more expensive than traditional cars. Government efforts to incentivise local production aim to mitigate this over time.
• Public awareness
  Many Filipinos need to be made aware of the financial and environmental benefits of EVs, highlighting the need for greater advocacy and education campaigns.

Bottom line
The government has created a comprehensive ecosystem for EVs by introducing progressive tax policies and incentives. Furthermore, by lowering costs and promoting EV-friendly infrastructure, both individuals and businesses are transitioning towards sustainable mobility.

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