How tax and incentives policy responded to the energy shock

IN BRIEF:

• The government responded to the 2026 energy shock by suspending excise taxes on selected fuel products and extending tax filing deadlines to ease cost pressures and support cash flows.

• Flexible tax and incentives policies, including temporary work-from-home allowances for registered businesses, helped balance economic relief with regulatory accountability during the crisis.

In early 2026, the Philippines found itself at the sharp end of a global energy shock. Conflict in the Middle East and the temporary closure of the Strait of Hormuz disrupted the global oil trade, sharply raising energy prices across global markets.

For a country heavily dependent on imported fuel, the effects were immediately tangible: rising pump prices, increased transport costs, and a growing strain on energy-intensive industries. In response, President Ferdinand R. Marcos, Jr. declared a state of national energy emergency, enabling a coordinated government response under existing legal frameworks to manage risks arising from global energy supply disruptions.

This article examines the various issuances and policy actions undertaken by key government agencies, including the Bureau of Internal Revenue (BIR) and the Fiscal Incentives Review Board (FIRB), to stabilize economic activity amid ongoing global energy market disruptions.

EXCISE TAX SUSPENSION AS FISCAL INTERVENTION
A central element of the government’s fiscal response to high global oil prices was the suspension of excise taxes on selected petroleum products, implemented under a framework authorized by Republic Act (RA) No. 12316. The law empowers the President to suspend or reduce excise taxes on petroleum products when prescribed market conditions are present, allowing fiscal policy to respond quickly to extraordinary price shocks without needing new legislation.

Pursuant to this authority, Executive Order (EO) No. 114, series of 2026, signed on April 16 and circularized by the BIR via Revenue Memorandum Circular (RMC) No. 0312026 on April 17, suspended the imposition of excise taxes on liquefied petroleum gas (LPG) and kerosene, subject to specific exclusions, for a period of three months from its effectivity. LPG remains taxable when used as a petrochemical input or for motive power, while kerosene remains taxable when used as aviation fuel.

This measure directly reduced retail fuel costs for households, small transport operators, and industries reliant on LPG and kerosene.

To operationalize the EO, the BIR issued Revenue Regulations (RR) No. 32026, which set the implementing rules, compliance guidelines, and administrative safeguards governing the excise tax suspension. RR No. 32026 expressly provides that the excise tax suspension applies only to qualified petroleum products removed from the place of production or customs custody beginning April 17. This suspension is also subject to reinstatement upon the occurrence of certain conditions.

To ensure proper implementation, RR No. 32026 imposes specific inventory submission and reporting requirements. Concerned manufacturers, importers, and lessees of storage depots are required to submit duly notarized inventories of all covered petroleum products as of April 16. Withdrawal Certificates must likewise bear the annotation: “STOCKS COVERED BY EO NO. 114, SERIES OF 2026.”

These requirements help protect government revenues, prevent the misuse or diversion of tax-exempt fuel, and ensure that excise tax relief is applied only within the allowed scope and duration of the suspension.

Overall, the excise tax suspension showed a careful and lawful use of fiscal flexibility. With clear rules under RR No. 32026, it provided targeted and time-bound relief for LPG and kerosene during a period of elevated energy costs, while maintaining the integrity and enforceability of the excise tax system.

DEADLINE EXTENSION AS ADMINISTRATIVE RELIEF
Complementing this fiscal intervention were administrative relief measures implemented by the BIR to ease taxpayer compliance. Consistent with its longstanding practice during periods of disruption, the BIR issued RMC No. 0302026 on April 14, extending the deadline for the filing and payment of 2025 annual income tax and the submission of the required attachments from April 15 to May 15, without the imposition of surcharges, interest, or penalties.

Taxpayers were likewise allowed to file electronically and settle liabilities through both digital payment channels and Authorized Agent Banks (AAB), regardless of their Revenue District Office (RDO).

This extension assisted businesses in preserving cash flows while operating and energy costs were rising. For many, particularly small and medium enterprises, the one-month deferral provided short-term breathing space to meet payroll and supplier obligations.

FACILITATION OF FUEL IMPORTS AND LOGISTICS SUPPORT
The BIR also played a critical role in safeguarding the fuel supply by facilitating expedited imports of petroleum products, particularly in support of procurement activities undertaken by the Philippine National Oil Company–Exploration Corporation (PNOC-EC).

In March, the BIR, through its Large Taxpayers Service (LTS), issued special permits to PNOC-EC to fast-track emergency imports of petroleum products, effectively streamlining documentary and procedural requirements. The BIR worked closely with PNOC-EC to ensure the timely processing of reporting requirements to help speed up clearances for fuel imports.

By supporting PNOC-EC’s fuel procurement and import logistics, the BIR helped stabilize fuel availability, highlighting its role not only as a revenue-collecting agency but also as an operational partner in broader economic stabilization efforts. This role is often overlooked but proved critical during the energy disruption.

TEMPORARY RBA WORK-FROM-HOME ARRANGEMENTS
Alongside the BIR’s measures, the FIRB adopted a complementary policy aimed at sustaining business operations under constrained conditions.

This policy was set out in FIRB Resolution No. 00526, effective March 24, which allowed RBEs in economic zones and freeports to temporarily adopt work-from-home (WFH) arrangements without losing their fiscal and non-fiscal incentives. The resolution allowed RBEs to adopt WFH arrangements for up to 90% of their workforce directly engaged in the registered project or activity. Investment Promotion Agencies (IPAs) may set a lower threshold where business operations require onsite presence, provided that the percentage does not fall below 50%.

A notable exception applies to RBEs in the Information Technology–Business Process Management (IT‑BPM) industry that maintain concurrent registrations with the Board of Investments (BoI). These enterprises are not subject to the same on-site workforce limitations following the 2022 precedent set by FIRB Resolution No. 026‑22 that allowed them to transfer their registration from an economic zone or freeport IPA to the BoI. This transition enabled them to adopt up to 100% WFH arrangements without compromising their fiscal incentives. Accordingly, RBEs with concurrent BoI registration may continue implementing full WFH arrangements, subject to BoI-specific terms and conditions.

However, safeguards are built into the framework. RBEs that exceed the WFH threshold imposed by their IPA are subject to regular income tax on the excess portion, computed by averaging all excesses made by the RBE in the month of non-compliance.

Strict monitoring and compliance requirements also apply. RBEs must notify their respective IPAs, submit verified inventories of equipment used for WFH, and comply with controls governing the movement of assets outside economic zones.

Notably, imported assets may be temporarily transferred only with prior approval and the posting of a surety bond equivalent to 150% of applicable duties and taxes. This ensures that fiscal incentives are not abused and that government revenue remains protected.

THE WAY FORWARD
Taken together, the coordinated actions of the BIR, FIRB, and related agencies reflect a pragmatic and measured response to a period of economic stress. More broadly, these measures illustrate the evolving role of tax and incentives policy. Beyond revenue generation and regulation, these tools can serve as instruments of stabilization capable of responding quickly, within legal bounds, and in proportion to emerging challenges.

As global disruptions become more frequent, the ability to deploy responsive yet accountable policy measures will be increasingly critical. The experience of 2026 offers a compelling case for adaptive tax and incentives governance — one that balances relief with responsibility, and agility with oversight — to foster resilience, sustain business confidence and support economic stability.

This article is for general information only and is not a substitute for professional advice where the facts and circumstances warrant. The views and opinions expressed above are those of the author and do not necessarily represent the views of SGV & Co.

Noel Andro D. Bico is a senior director from the Global  Compliance & Reporting Sub-Service Line of SGV & Co.