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
Section 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:
Article
39
Incentives
to Registered Enterprises
All registered enterprises
shall be granted the following incentives to the extent engaged in a preferred
area of investment:
(a) Income Tax Holiday
(1)
For six (6) years from commercial 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:
(i) The project meets the prescribed ratio of capital
equipment to number of workers set by the Board;
(ii) Utilization of indigenous raw materials at rates set
by the Board;
(iii) The net foreign exchange savings or earnings amount
to at least US$500,000 annually during the first three (3) years of operation.
The preceding paragraph
notwithstanding, no registered pioneer firm may avail of this incentive for a
period exceeding eight (8) years.
(2)
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.
(3)
The provision of Article 7(14) notwithstanding,
registered firms shall not be entitled to any extension of this incentive.
(b) 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.
(c) 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:
(1)
They are not manufactured domestically in sufficient
quantity, or comparable quality, and at reasonable prices;
(2)
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
(3)
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.
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:
(1)
To another registered enterprise or registered
domestic producer enjoying similar activities;
(2)
For reasons of proven technical obsolescence; or
(3)
For purpose of replacement to improve and/or expand
the operations of the registered enterprise.
(d) 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.
(e) 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.
(f) 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.
(g) 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.
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.
(h) 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:
(1)
Not locally available and/or obtainable locally in
comparable quality and at reasonable prices;
(2)
Reasonably needed in the registered activity; and
(3) Approved by the Board.
(i) 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,
(1)
That said breeding stocks and genetic materials
would have qualified for tax and duty-free importation under the preceding
paragraph;
(2)
That the breeding stocks and genetic materials are
reasonably needed in the registered activity;
(3)
That approval of the Board has been obtained by the
registered enterprise; and
(4)
That the purchase is made within ten (10) years from
the date of registration of commercial operation of the registered enterprise.
(j) 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.
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.
(k) 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.
(l) 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.
(m) 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."
Section 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.
Section 3
All other laws, decrees, orders, issuances and rules and regulations or
parts thereof inconsistent with this Act, are hereby repealed or modified
accordingly.
Section 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.
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