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REPUBLIC ACT NO. 7918
AN ACT AMENDING ARTICLE 39, TITLE III OF EXECUTIVE ORDER NO. 226, OTHERWISE
KNOWN AS THE OMNIBUS INVESTMENTS CODE OF 1987, AS AMENDED, AND FOR OTHER
PURPOSES
Sec. 1. Article 39, Title III of Executive Order No. 226, otherwise known
as the Omnibus Investments Code of 1987, as amended, is hereby further
amended to read as follows:
"Art. 39. Incentives to Registered Enterprises. - All registered
enterprises shall be granted the following incentives to the extent engaged
in a preferred area of investment: casia
- Income Tax Holiday.
-
(1) For six (6) years from commecial operation for pioneer firms
and four (4) years for non-pioneer firms, new registered firms
shall be fully exempt from income taxes levied by the national
government. Subject to such guidelines as may be prescribed by
the Board, the income tax exemption will be extended for another
year in each of the following cases:
- The project meets the prescribed ratio of capital equipment
to number of workers set by the Board;
- Utilization of indigenous raw materials at rates set by the
Board;
- The net foreign exchange savings or earnings amount to at
least US$500,000 annually during the first three (3) years of
operation. cdt
"The preceding paragraph notwithstanding, no registered
pioneer firm may avail of this incentive for a period exceeding
eight (8) years.
- For a period of three (3) years from commercial operation, registered
expanding firms shall be entitled to an exemption from income taxes
levied by the national government proportionate to their expansion
under such terms and conditions as the Board may determine: Provided,
however, That during the period within which this incentive is availed
of by the expanding firm it shall not be entitled to additional
deduction for incremental labor expense.
- The provision of Article 7(14) notwithstanding, registered firms
shall not be entitled to any extension of this incentive.
- Additional Deduction for Labor Expense. - For the first five (5) years
from registration a registered enterprise shall be allowed an additional
deduction from the taxable income of fifty percent (50%) of the wages
corresponding to the increment in the number of direct labor for skilled
and unskilled workers if the project meets the prescribed ratio of capital
equipment to number of workers set by the Board: Provided, That this
additional deduction shall be doubled if the activity is located in
less developed areas as defined in Article 40. cd i
- Tax and Duty Exemption on Imported Capital Equipment and its Accompanying
Spare Parts. - New, expanding/modernizing enterprise which have been
registered with the Board of Investments on or before December 31, 1994
shall be exempt to the extent of one hundred percent (100%) of national
internal revenue taxes and customs duties on importations of machinery,
equipment and accompanying spare parts within the prescribed period
under its law of registration or until December 31, 1997 whichever comes
first: Provided, however, That the enterprise which shall register after
December 31, 1994 shall be subject to the provisions of Republic Act
No. 7716, and three percent (3%) customs duties up to December 31, 1997:
Provided, finally, That the importation of machinery, equipment and
accompanying spare parts shall comply with the following conditions:
- They are not manufactured domestically in sufficient quantity,
or comparable quality, and at reasonable prices;
- They are reasonably needed and will be used exclusively by the
registered enterprise in its registered activity, unless prior approval
of the Board is secured for the part-time utilization of said equipment
in a non-registered activity to maximize usage thereof or the proportionate
taxes and duties are paid on specific equipment and machinery being
permanently used for non-registered activities; and
- The approval of the Board was obtained by the registered enterprise
for the importation of such machinery, equipment and accompanying
spare parts.
"In granting the approval of the importations under this paragraph,
the Board may require international canvassing but if the total cost
of the capital equipment or industrial plant exceeds US$5,000,000,
the Board shall apply or adopt the provisions of Presidential Decree
No. 1764 on international competitive bidding. casia
"If the registered enterprise sells, transfers or disposes of
these machinery, equipment and spare parts without prior approval
of the Board within five (5) years from date of acquisition, the registered
enterprise and the vendee, transferee, or assignee shall be solidarily
liable to pay twice the amount of the tax exemptions given it. The
Board shall allow and approve the sale, transfer or disposition of
the said items until December 31, 1997 or December 31, 1999 as the
case may be if made:
- (aa) To another registered enterprise or registered domestic producer
enjoying similar activities;
- For reasons of proven technical obsolescence; or
- For purpose of replacement to improve and/or expand the operations
of the registered enterprise.
- Tax Credit on Domestic Capital Equipment. - A tax credit equivalent
to one hundred percent (100%) of the value of the national internal
revenue taxes and customs duties that would have been waived on the
machinery, equipment and spare parts, had these items been imported
shall be given to the new and expanding enterprise registered with the
Board of Investments as of December 31, 1994 which purchases machinery,
equipment and spare parts from a domestic manufacturer: Provided, (1)
That the said equipment, machinery and spare parts are reasonably needed
and will be used exclusively by the registered enterprise in its registered
activity, unless prior approval of the Board is secured for the part-time
utilization of said equipment in a non-registered activity to maximize
usage thereof; (2) That the equipment would have qualified for tax and
duty exemption under paragraph (c) hereof; (3) That the approval of
the Board was obtained by the registered enterprise; and (4) That the
purchase is made on or before December 31, 1997 or December 31, 1999
as the case may be. If the registered enterprise sells, transfers, or
disposes of these machinery, equipment and spare parts, the provision
in the preceding paragraph for such disposition shall apply.
- Simplification of Customs Procedures. - Customs procedures for the
importation of equipment, spare parts, raw materials and supplies, exports
of processed products by registered enterprises shall be simplified
by the Bureau of Customs. acd
- Unrestricted Use of Consigned Equipment. - Provisions of existing
laws notwithstanding, machinery, equipment and spare parts consigned
to any enterprise shall not be subject to restrictions as to period
of use of such machinery, equipment and spare parts: Provided, That
the appropriate re-export bond is posted unless importation is otherwise
covered under subsections (c) and (1) of this Article: Provided, further,
That such consigned equipment shall be for the exclusive use of the
registered enterprise.
"If such equipment is sold, transferred or otherwise, Article 39(c)(3)
shall apply. Outward remittance of foreign exchange covering the proceeds
of such sale, transfer or disposition shall be allowed only upon prior
Bangko Sentral ng Pilipinas approval.
- Employment of Foreign Nationals. - Subject to the provisions of Section
29 of Commonwealth Act No. 613, as amended, a registered enterprise
may employ foreign nationals in supervisory, technical or advisory positions
for a period not exceeding five (5) years from its registration, extendible
for limited periods at the discretion of the Board: Provided, however,
That when the majority of the capital stock of a registered enterprise
is owned by foreign investors, the positions of president, treasurer,
and general manager or their equivalents may be retained by foreign
nationals beyond the period set forth within.
"Foreign nationals under employment contract within the purview
of this incentive, their spouses and unmarried children under twenty-one
(21) years of age, who are not excluded by Section 29 of Commonwealth
Act No. 613, as amended, shall be permitted to enter and reside in
the Philippines during the period of employment of such foreign nationals.
cd i
"A registered enterprise shall train Filipinos as understudies
of foreign nationals in administrative, supervisory and technical
skills and shall submit annual reports on such training to the Board.
- Exemption on Breeding Stocks and Genetic Materials. - The importation
of breeding stocks and genetic materials within ten (10) years from
the date of registration of commercial operation of the enterprise shall
be exempt from all taxes and duties: Provided, That such breeding stocks
and genetic materials are:
- not locally available and/or obtainable locally in comparable
quality and at reasonable prices;
- reasonably needed in the registered activity; and
- approved by the Board.
- Tax Credit on Duty Portion of Domestic Breeding Stocks and Genetic
Materials. - A tax credit equivalent to one hundred percent (100%) of
the value of national internal revenue taxes and customs duties that
would have been waived on the breeding stocks and genetic materials
had these items been imported shall be given to the registered enterprise
which purchases breeding stocks and genetic materials from a domestic
producer: Provided,
- That said breeding stocks and genetic materials would have qualified
for tax and duty-free importation under the preceding paragraph;
- That the breeding stocks and genetic materials are reasonably
needed in the registered activity;
- That approval of the Board has been obtained by the registered
enterprise; and
- That the purchase is made within ten (10) years from the date
of registration of commercial operation of the registered enterprise.
- Tax Credit for Taxes and Duties on Raw Materials. - Every registered
enterprise shall enjoy a tax credit equivalent to the national internal
revenue taxes and customs duties paid on the supplies, raw materials
and semi-manufactured products used in the manufacture, processing or
production of its export products and forming part thereof; Provided,
however, That the taxes on the supplies, raw materials and semi-manufactured
products domestically purchased are indicated as a separate item in
the sales invoice. casia
"Nothing herein shall be construed as to preclude the Board
from setting a fixed percentage of exports sales as the approximate
tax credit for taxes and duties of raw materials based on an average
or standard usage for such materials in the industry.
- Access to Bonded Manufacturing/Trading System. - Registered export-oriented
enterprises shall have access to the utilization of the bonded warehousing
system in all areas required by the project subject to such guidelines
as may be issued by the Board upon prior consultation with the Bureau
of Customs.
- Exemption from Taxes and Duties on Imported Spare Parts. - Importation
of required supplies and spare parts for consigned equipment or those
imported tax and duty-free by a registered enterprise with a bonded
manufacturing warehouse shall be exempt from customs duties and national
internal revenue taxes payable thereon: Provided, however, That such
spare parts and supplies are not locally available at reasonable prices,
sufficient quantity and comparable quality: Provided, finally, That
all such spare parts and supplies shall be used only in the bonded manufacturing
warehouse of the registered enterprise under such requirements as the
Bureau of Customs may impose.
- Exemption from Wharfage Dues and Export Tax, Duty, Imposts and Fee.
- The provision of law to the contrary notwithstanding, exports by a
registered enterprise of its non-traditional export products shall be
exempted from any wharfage dues, and any export tax, duty impost and
fee."
Sec. 2. All other provisions of Executive Order No. 226 and Republic
Act No. 7369, also known as "An Act Granting Tax and Duty Exemption
and Tax Credit on Capital Equipment," not otherwise affected by the
provisions of this Act shall remain in full force and effect. cdt
Sec. 3. All other laws, decrees, orders, issuances and rules and regulations
or parts thereof inconsistent with this Act, are hereby repealed or modified
accordingly.
Sec. 4. Effectivity Clause. - This Act shall have retroactive effect
to May 5, 1994 fifteen (15) days following its publication in a newspaper
of general circulation.
Approved: February 24, 1995
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