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Chan Robles Virtual Law Library
PRESIDENTIAL DECREE NO. 1159
PRESIDENTIAL DECREE NO. 1159 -
PRESCRIBING INCENTIVES FOR INVESTMENTS IN AGRICULTURAL ENTERPRISE
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chanroblesvirtualawlibrary
WHEREAS, it
is our primordial objective to be self-reliant in our basic
requirements for food and raw materials and in the implementation
thereof also hasten our rural development and thus bring about a more
equitable distribution of wealth for our people; chanroblesvirtualawlibrary
WHEREAS, it is necessary that we attain a mutually reinforcing balance
in the development of the agricultural and industrial sectors of our
economy;chanroblesvirtualawlibrary
WHEREAS, the accelerated development of the agricultural sector
strengthens and stabilizes the economic, political, and social
structure of the country by diffusing productive employment and income
opportunities to the countryside while attaining self-sufficiency in
basic food and raw materials, and increasing production of export crops
and other products;chanroblesvirtualawlibrary
WHEREAS, agricultural endeavors are generally of a higher risk nature
than industrial or commercial undertakings due to its exposure to
natural calamities and the vagaries of whether, and thus require more
and different incentives;chanroblesvirtualawlibrary
NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Philippines,
by virtue of the powers in me vested by the Constitution do hereby
order and decree the extension of additional incentives to cultural
endeavors, to wit:cralaw:red
Section 1. Title. — This Decree shall be known and
cited as the "Agricultural Investments Incentives Act."
Section 2. Definition of terms. — As used in this
Decree the following terms are defined as follows:cralaw:red
a) "Board of Investments" or "Board " shall mean the
Board of Investments created by Republic Act No. 5186, otherwise known
as the Investment Incentives Act.
b) "Department of Agriculture" or "Department" shall
mean the Department of Agriculture.
c) "Registered Agricultural Enterprise" shall mean
any individual, corporation, partnership, cooperative or other entity
organized and existing under the Philippine laws which is registered
with the Board of Investments in accordance with this Decree.
d) "Pioneer Agricultural Enterprise" shall mean an
enterprise registered with the Board and engaged in the pursuit of
agricultural activities and/or service, including the industrial
aspects of food processing whenever appropriate, predetermined jointly
by the board and the Department to be feasible and highly essential to
the attainment of the national goal taking into account the risk,
magnitude of investment, relation to a declared specific national food
and agriculture program for self-sufficiency and other social benefits
of the project: Provided, that the final product in the case of
processed food involves or will involve substantial use and processing
of domestic raw materials from agricultural production.
e) "Agricultural Investments Priorities Plan" shall
mean the plan prepared jointly by the Board and the Department and
approved by the President upon recommendation of the National Economic
and Development Authority.
f) "Preferred Areas of Investment" shall mean the
economic activities which may be pioneer or non-pioneer in nature,
declared as such in the Agricultural Investments Priorities Plan.
g) "Philippine national" shall mean a citizen of the
Philippines; or a partnership, a cooperative, or association wholly
owned by citizens of the Philippines; or a corporation organized under
the laws of the Philippines of which at least sixty per cent of the
capital stock outstanding and entitled to vote is owned and held by
citizens of the Philippines; or a trustee of funds for pension or other
employee retirement or separation benefits, where the trustee is a
Philippine national and at least sixty per cent of the fund will accrue
to the benefit of Philippine nationals: Provided, That where a
corporation and its non-Filipino stockholders own stock in a registered
enterprise, at least sixty per cent of the capital stock outstanding
and entitled to vote to both corporations must be owned and held by the
citizens of the Philippines and at least sixty per cent of the members
of the board of directors of both corporations must be citizens of the
Philippines in order that the corporation shall be considered a
Philippine national. chanroblesvirtualawlibrary
h) "Foreign loan" shall mean any credit facility or
financial assistance other than equity investment obtained by a
registered enterprise from a source outside the Philippines and brought
into the Philippines either in foreign exchange or in other assets, and
registered with the Central Bank and the Board, which shall assess and
appraise the assets other than foreign exchange representing the
proceeds of the loan.
i) "Foreign investments" shall mean equity
investment, owned by a non-Philippine national in a registered
enterprise, made in the form of foreign exchange or other assets
actually transferred to the Philippines and registered with the Central
Bank and the Board, which shall assess and appraise the value of such
assets other than foreign exchange.
j) "Measured capacity" shall mean the estimated
additional volume of agricultural production, service or food product,
which the Board and the Department shall have jointly determined to be
desirable in each preferred area of investment in order to supply the
needs of the economy at reasonable prices taking into account the
export potential of the area.
k) "Tax credit" shall mean any of the credits against
taxes and/or duties extended to a registered enterprise by the
Secretary of Finance pursuant to this Decree. chanroblesvirtualawlibrary
l) "Capital stock" shall be construed to include the
stock certificates issued by corporations, membership certificates
issued by cooperatives, and such other legal evidences of ownership
issued by other entities.
Section 3. Basic Rights and Guarantees. — All
investors and enterprises are entitled to the basic rights and
guarantees provided in the Constitution. Among other rights recognized
by the Government of the Philippines are the following:cralaw:red
a) Repatriation of Investment. — In the case of
foreign investments, the right to repatriate the entire proceeds of the
liquidation of the investment in the currency in which the investment
was originally made and at the exchange rate prevailing at the time of
repatriation.
b) Remittance of Earnings. — In the case of foreign
investments, the right to remit earnings from the investment in the
currency in which the investment was originally made and at the
exchange rate prevailing at the time of remittance, subject to the
provisions of Section 74 of Republic Act 265.
c) Foreign Loans and Contracts. — The right to remit,
at the exchange rate prevailing at the time of remittance, such sums as
may be necessary to meet the payments of interest and principal on
foreign loans and foreign obligations arising from technological
assistance contracts, subject to the provisions of Section 74 of
Republic Act 265.
d) Freedom from Expropriation. — There shall be no
expropriation by the government of the property represented by
investments or of the property of enterprises except for public use or
in the interest of national welfare and defense and upon payment of
just compensation. In such cases, foreign investors or enterprises
shall have the right to remit sums received as compensation for the
expropriated property in the currency in which the investment was
originally made and at the exchange rate at the time of remittance,
subject to the provisions of Section 74 of Republic Act 265. chanroblesvirtualawlibrary
e) Requisition of Investment. — There shall be no
requisition of the property represented by the investment or of the
property of enterprises, except in the event of war or national
emergency and only for the duration thereof. Just compensation shall be
determined and paid either at the time of requisition or immediately
after cessation of the state of war or national emergency. Payments
received as compensation for the requisitioned property may be remitted
in the currency in which the investment was originally made and at the
exchange rate prevailing at the time of remittance, subject to the
provisions of Section 74 of Republic Act 265.
Section 4. Incentives to Investors in Agricultural
Registered Enterprise. — An investor, with respect to his investment in
a registered enterprise, shall be granted the following incentives
benefits:cralaw:red
a) Protection of Patents and Other Proprietary
Rights. — The right to be protected from infringement of patents,
trademarks, copyrights, trade names and other proprietary rights, have
been registered with the Board and the appropriate agencies of the
Government of the Philippines.
b) Capital Gains Tax Exemption. — Exemption from
income tax on that portion of the gains realized from the sale,
disposition, or transfer of capital assets, as defined in Section 34 of
the National Internal Revenue Code, that corresponds to the portion of
the proceeds of the sale that is invested in new issues of capital
stock of a registered enterprise within six months from the date the
gains were realized; Provided, (1) that the said sale, disposition or
transfer and the investment of the proceeds thereof have been
registered with the Board and the Bureau of Internal Revenue; and (2)
that the shares of stock representing the investment are not disposed
of, transferred, assigned or conveyed for a period of five years form
the date the investment was made. If such shares of stock are disposed
of within the said period of five (5) years, all taxes due on the gains
realized from the original transfer sale or disposition of the capital
assets shall immediately become due and payable.
Section 5. Incentives to Philippine Nationals
Investing In Pioneer Agricultural Enterprise. — In addition to the
incentives provided in the preceding sections, Philippine nationals
investing in a pioneer agricultural enterprise shall be granted the
following incentive benefits:cralaw:red
a) Tax-Allowance for Investments. — An investment
allowance to the extent of his actual investment, paid in cash or
property shall be allowed as a deduction from his taxable income but
not to exceed twenty (20%) percent thereof; Provided, (1) That the
investment is made in a subscription of shares in the original and/or
increased capital stock of a pioneer enterprise within seven years from
the date of registration; (2) That the investment does not come from
the proceeds of the sale, disposition, or transfer of capital assets
where the gain realized therefrom is exempt from income tax; (3) That
the shares are held for a period of not less than three years; (4) That
the investment is registered with the Board. If the shares are disposed
of within the said three year period, the taxpayer shall lose the
benefit of this deduction, his income tax liability shall be
recomputed, and he shall pay whatever additional sum be due plus
interest thereon, within thirty days from the date of disposition.
b) Capital Gains Tax Exemption. — Exemption from
income tax on the portion of the gains realized from the sale,
disposition or transfer of capital assets, as defined in Section 34 of
the National Internal Revenue Code, that corresponds to the portion of
the proceeds of the sale that is invested in new issues of capital
stock of or in the purchase of stock owned by foreigners in pioneer
enterprises, within six months from the date the gains were realized:
Provided, (1) That such sale, disposition or transfer and the
investment of the proceeds thereof are registered with the Board and
the Bureau of Internal Revenue; and (2) that the share of stock
representing the investment are not disposed of, transferred, assigned
or conveyed for a period of three (3) years from the date the
investment was made. If said share of stock are disposed of within the
said period of three (3) years, all taxes due on the gains realized
from the original transfer, sale or disposition of the capital assets
shall immediately become due and payable.
Section 6. Incentives to a Registered Agricultural
Enterprise. — A registered enterprise, to the extent engaged in a
preferred of investment, shall be granted the following incentive
benefits:cralaw:red
a) Deduction of Organizational and Pre-operating
Expenses. — All capitalized organizational and pre-operating expenses
attributable to the establishment of a registered enterprise may be
deducted from its taxable income over a period of not more than ten
years beginning with the month the enterprise begins operations,
provided the taxpayer indicates the desired amortization period at the
time of the filing of income tax returns for the first taxable year.
For the purpose of this provision, organizational and pre-operating
expenses shall include expenses for pre-investment studies, start up
costs, costs of initial recruitment and training, pilot projects and
similar expenses.
b) Accelerated Depreciation. — At the option of the
taxpayer and in accordance with the procedure established by the Bureau
of Internal Revenue, fixed assets and capital equipment including
breeding stock may be (1) depreciated to the extent of not more than
twice as fast as normal rate of depreciation or depreciated at normal
rate of depreciation if expected life is ten years or less; or (2)
depreciated over any number of years between five years and expected
life if the latter is more than ten (10) years; and the depreciation
thereon allowed as a deduction from taxable income: Provided, that the
taxpayer notifies the Bureau of Internal Revenue at the beginning of
the depreciation period which depreciation rate allowed by this section
will be used.
c) Net Operating Loss Carry-over. — A net operating
loss incurred in any of the first ten years of operations may be
carried over as a deduction from taxable income for the six years
immediately following the year of such loss. The entire amount of the
loss shall be carried over to the first of the six taxable years
following the loss, and any portion of such loss which exceeds the
taxable income of such first year shall be deducted in like manner from
the taxable income of the next remaining five years. The net operating
loss shall be computed in accordance with the provisions of the
National Internal Revenue Code, any provisions of this Decree to the
contrary notwithstanding, except that income not taxable either in
whole or in part under this or other laws shall be included in gross
income. chanroblesvirtualawlibrary
d) Tax Exemption on Imported Capital Equipment. —
Within seven years from the date of registration of the enterprise,
importations of machinery and equipment, and spare parts shipped with
such machinery and equipment, shall not be subject to tariff duties and
compensating tax; Provided, That said machinery, equipment and spare
parts: (1) are not manufactured domestically in reasonable quantity and
quality at reasonable prices; (2) are directly and actually needed and
will be used exclusively by the registered enterprises in the
manufacture of its products, unless prior approval of the Board is
secured for the part-time utilization of said equipment in
non-registered operations to maximize usage thereof, or the
proportionate taxes and duties are paid on the specific equipment and
machinery being permanently used for non-registered operations; (3) are
covered by shipping documents in the name of the registered enterprise
to whom the shipment will be delivered directly by customs authorities
and (4) the prior approval of the Board was obtained by the registered
enterprise before the importation of such machinery, equipment and
spare parts. For enterprises approved for registration by the Board
after the effective date of this Decree, which are engaged in new
preferred non-pioneer activities with total assets or projected total
assets of five hundred thousand pesos (P500,000) or more for the first
two (2) years of commercial operations, the Board, subject to the
criteria to be formulated in consultation with the Secretary of
Finance, and to the above enumerated conditions, shall in lieu of an
exemption reduce partially the tariff duties and compensating tax on
such machinery, equipment and spare parts, and defer the payment of
such reduced taxes and duties for a period not exceeding ten (10)
years, after posting the appropriate bond as may be required by the
Secretary of Finance. For replacement or modernization of existing
facilities of pioneer and non-pioneer registered enterprises or for
expansion of projects with 20% or greater return on equity, but in no
case exceeding 33-1/3% thereof, mere deferment in payment of taxes and
duties as above provided shall be allowed without reduction thereof for
return of taxes and duties as above provided shall be imposed without
deferment. In granting approval of importations under this paragraph,
the Board shall require international bidding to be conducted by the
end-user in Manila under its supervision; however, the Board may, in
its discretion, dispense with this requirement if (1) there is, to the
knowledge of the Board, only one manufacturer of the machinery,
equipment, and spare parts to be imported, or (2) the importation is
caused by the expansion of the registered enterprises and such imports
shall be acquired from the same manufacturer who supplied the
machinery, equipment, and spare parts being used by the registered
enterprise, or (3) the cost of importation is less than one million
U.S. dollars (US$1,000,000), or (4) the Board has other means of
determining the reasonableness of the procurement cost. If the
registered enterprise sells, transfers or disposes of these machinery,
equipment and spare parts without the prior approval of the Board
within five (5) years from the date of acquisition, the registered
enterprise shall pay twice the amount of the tax exemption given it.
However, the Board shall allow and approve the sale, transfer, or
disposition of the said items within the said period of five (5) years
if made: (1) to another registered enterprise; (2) for reasons of
proven technical obsolescence or (3) for purposes of replacement to
improve and/or expand the operations of the enterprise. In such cases,
the transfer shall not be subject to taxes and duties on the said
equipment other than the deferred taxes, if any; if it will undertake
an economic project substantially carrying out the objective for which
such equipment has been imported, as determined by the Board.
e) Tax exemption on Breeding Stocks and Genetic
Materials. — In addition to the above incentive benefits, the
registered agricultural enterprise shall be entitled to a tax exemption
on breeding stocks and/or genetic materials imported within seven years
from the date of registration of the enterprise: Provided, that such
breeding stock and/or genetic materials are (1) not locally available
strains/breeding stocks at reasonable prices; (2) shall be used
exclusively by the registered agricultural enterprise in the
improvement of the strains/breeding stocks of its livestocks, poultry,
fish and/or plants and must have been acquired with prior approval of
the Board; Provided, further that breeding stocks and genetic materials
shall not be disposed of, transferred or sold for whatever reason
within the periods specified in the rules and regulations to implement
the Decree, except for causes prejudicial to the viability and
operation of the enterprise as determined and approved by the Board.
Sale, transfer and disposition made within the specified period without
prior approval shall render the registered enterprise liable to pay
twice the amount of tax that should have been paid. chanroblesvirtualawlibrary
f) Tax credit on Domestic Capital Equipment. — A tax
credit equivalent to one hundred per cent (100%) of the value of the
compensating tax and customs duties that would have been paid on the
machinery, equipment and spare parts had these items been imported,
shall be given to the registered enterprise which purchases machinery,
equipment and spare parts from a domestic manufacturer, and another tax
credit equivalent to fifty per cent (50%) thereof shall be given to the
said manufacturer: Provided, (1) That the said machinery, equipment and
spare parts are directly and actually needed and will be used
exclusively by the registered enterprise in the manufacture of its
products, unless prior approval of the Board is secured for the
part-term utilization of said equipment in non-registered operation to
maximize usage thereof; (2) that the prior approval of the Board was
obtained by the local manufacturer concerned; and (3) that the sale is
made within the period determined by the Board in consultation with the
Department. If the registered enterprise sells, transfers or disposes
of these machinery, equipment and spare parts without the prior
approval of the Board within five (5) years from the date of
acquisition, then it shall pay twice the amount of the tax credit given
it. However, the Board shall allow and approve the sale, transfer, or
disposition of the said items within the said period of five (5) years
if made (1) to another registered enterprise; (2) for reasons of proven
technical obsolescence; or (3) for purposes of replacement to improve
and/or expand the operations of the enterprise.
g) Tax Credit for Withholding Tax on Interest. — A
tax credit for taxes withheld on interest payments on foreign loans
shall be given a registered enterprise when (1) no such credit is
enjoyed by the lender-remittee in his country and (2) the registered
enterprise has assumed the liability for payment of the tax due from
the lender-remittee.
h) Employment of Foreign Nationals. — Subject to the
provisions of Section 29 of Commonwealth Act 613, as amended, an
enterprise may, within five years from registration, employ foreign
nationals in supervisory, technical or advisory positions not in excess
of five per centum of its total personnel in each such category:
Provided, That in no case shall each employment exceed five years. The
employment of foreign nationals after five years from registration, or
within such five years but in excess of the proportion herein provided,
shall be governed by Section 20 of Commonwealth Act 613, as
amended. chanroblesvirtualawlibrary
Foreign nationals under employment contract within the purview of this
Decree, their spouse and unmarried children under 21 years of age, who
are not excluded by Section 29 of Commonwealth Act 613, shall be
permitted to enter and reside in the Philippines during the period of
employment of such foreign nationals. chanroblesvirtualawlibrary
A registered enterprise shall train Filipinos in administrative,
supervisory and technical skills and shall submit annual reports on
such training to the Board of Investments.
i) Deduction for Expansion Reinvestment. — When a
registered enterprise reinvests its undistributed profit or surplus,
whether from registered operation or not, by actual transfer thereof to
the capital stock of the corporation, retention thereof in case of
individual partnership or cooperatives or for procurement of machinery,
equipment, spare parts, breeding stocks and genetic materials
previously approved by the Board under subsections "d", "e" and "f"
hereof, or for the expansion of machinery and equipment used in
production, or for the construction of the buildings, improvements or
other facilities for the installation of the said machinery and
equipments, or for development of additional land area for production
purposes the amount so reinvested, to the extent of 25%, 37-1/2, 50% in
case of non-pioneer projects, and to the extent of 50%, 75%, 100% in
the case of pioneer projects, the appropriate percentage to be jointly
determined by the Board and the Department for each priority sector
taking into account the relative risk, technology transfer and fallout,
export potential or contribution to self-sufficiency in food, etc.,
incremental labor, use of locally manufactured machinery and equipment
and domestic raw materials, shall be allowed as a deduction from its
taxable income in the year in which such reinvestment was made:
Provided, (1) That prior approval of the Board of such reinvestment was
obtained by the registered enterprise planning such reinvestment, and
(2) that the registered enterprise does not reduce its capital stock
represented by the reinvestment within seven (7) years from the date
such reinvestment was made. In the event that the registered enterprise
does not order the machinery and equipment within two (2) years from
the date the reinvestment was made or reduces its capital stock
represented by the reinvestment within a period of seven (7) years from
the date of reinvestment, a recomputation of the income tax liability
therefor shall be made for the period when the deduction was made, and
the proper taxes shall be assessed and paid with interest.
j) Anti-Dumping Protection. — Upon recommendation of
the Board, made after notice and hearing, the President shall issue a
directive banning for a limited period the importation of goods or
commodities which, as provided in Section 301 (a) (1) of the Tariff and
Customs Code of the Philippines, unfairly or unnecessarily compete with
those produced by registered enterprises: Provided, (1) That the Board
certifies to the satisfactory quality of the goods or commodities
produced or manufactured by the registered enterprises; and (2) that
the enterprises agree not to increase the price of these goods, or
commodities during this period, unless, for good cause, the Board
allows such an increase.
k) Deduction of Labor Training Expenses. — An
additional deduction from taxable income of one-half of the value of
labor training expenses incurred for upgrading the productivity and
efficiency of unskilled labor shall be granted to a registered
enterprise: Provided, That such training program is duly approved by
the appropriate government agency or in the absence thereof by the
Board: and, Provided, further, That deduction shall not exceed ten per
cent (10%) of direct labor wage.
l) Deduction of Research and Development Program and
Agricultural Management Training Expenses. — An additional deduction
from taxable income of twenty-five per cent (25%) of the research and
development training expenses of Philippine nationals within a period
of seven (7) years from the date of registration shall be granted to a
registered agricultural enterprise: Provided, That such research and
development programs and the fields of agricultural management training
are duly approved by the Board in consultation with the Department: and
Provided, further, That such deduction on both programs shall not
exceed ten per cent (10%) of taxable income.
m) Incentives for Necessary and Major Infrastructure
and Public Facilities. — Registered agricultural enterprises
establishing their production, processing and manufacturing plants in
an area that the Board designates as necessary for the proper dispersal
of industry or in an areas which the Board finds deficient in
irrigation, drainage and other similar waterworks infrastructure, may
apply in payment of taxes due from it to the government an amount
equivalent to one hundred (100%) per cent of necessary and major
infrastructure works it may have undertaken with the prior approval of
the Board in consultation with the Department and other government
agencies concerned: Provided, That the title to all such infrastructure
works shall, upon completion, be transferred to the Philippine
Government after which appropriate charges shall be collected by the
government for the use of these facilities: Provided, further, That
should the registered enterprise undertake necessary and major
maintenance work on such infrastructure works with the prior approval
of the Board, a similar incentive shall be given to it in an amount
equivalent to the cost of such necessary maintenance.
n) Deduction of Freight and Transportation Expenses.
— An additional deduction from taxable income not exceeding thirty per
cent (30%) of freight and transportation expenses incurred within a
period of five (5) years from date of registration shall be granted to
a registered agricultural enterprise; Provided, That such agricultural
enterprise is established in a geographical area that the Board in
consultation with the Department, designates as a preferred location
for agricultural development and in a location that the Board finds
deficient in transport facilities; and Provided, further, That such
freight and transportation expenses are incurred in the course of
transportation registered products from the agricultural enterprises'
project area to the nearest economic marketing center as jointly
determined by the Board and the Department.
Section 7. Incentives to a Pioneer Agricultural
Enterprise. — In addition to the incentives provided in the preceding
section, pioneer agricultural enterprises shall be granted the
following incentives:cralaw:red
a) Tax Exemption. — Exemption from all taxes under
the National Internal Revenue Code, except income tax, from the date
the area of investment is included in the Agricultural Investments
Priorities Plan, to the following extent:cralaw:red
1) One hundred per cent (100%) for the first three
years;chanroblesvirtualawlibrary
2) Seventy-five per cent (75%) for the fourth through
the fifth years;chanroblesvirtualawlibrary
3) Fifty per cent (50%) for the sixth and seventh
years;chanroblesvirtualawlibrary
4) Twenty-five per cent (25%) for the eight and ninth
years; and chanroblesvirtualawlibrary
5) Ten per cent (10%) for the tenth year.
b) Employment of Foreign Nationals. — Subject to the
provisions of Section 29 of Commonwealth Act 613, as amended, a
registered enterprise may, with five (5) years from the date it has
began operating, employ and bring into the Philippines foreign
nationals under the following conditions:cralaw:red
1) That such foreign nationals shall be registered
with the Board;chanroblesvirtualawlibrary
2) That the employment of all foreign nationals shall
cease and they shall be repatriated after the above-mentioned period;
Provided, That when the majority of the capital stock of the pioneer
enterprise is owned by foreign investors, the positions of president,
treasurer and general manager, or their equivalents, may be retained by
foreign nationals. In exceptional cases, the Board may allow employment
of foreign nationals in other positions that cannot be filled by
Philippine nationals, but in such cases the limitations of Section six
paragraph (h) of this Decree shall apply.
Foreign nationals under employment contract within the purview of this
Decree, their spouse and unmarried children under 21 years of age, who
are not excluded by Section 29 of Commonwealth Act 613, shall be
permitted to enter and reside in the Philippines during the period of
employment of such foreign nationals.
c) Post-Operative Tariff Protection. — Upon
recommendation of the Board, the President, with or without the
recommendation of the Tariff Commission or the National Economic and
Development Authority, shall issue a certification that a pioneer
agricultural enterprise shall be entitled to post-operative tariff
protection to an extent not exceeding fifty per cent of the dutiable
value of imported items similar to those being manufactured or produced
by a pioneer agricultural enterprise, unless a higher rate or amount is
provided for in the Tariff Code or pertinent laws. Said tariff shall
take effect automatically upon certification by the Board that the
pioneer agricultural enterprise is operating on a commercial scale:
Provided, That said Tariff, once operative, may be modified in
accordance with Section 401 of the Tariff and Customs Code.
Section 8. Special Export Incentives for Registered
Agricultural Enterprises. — Registered agricultural enterprises shall
be entitled to the following special incentives for exports their
registered products and commodities: chanroblesvirtualawlibrary
a) Special Tax Credit. — A tax credit equivalent to
the sales, compensating and specific taxes and duties on the supplies,
raw materials and semi-manufactured products used in the manufacture,
processing or production of its export products and forming part
thereof, whether exported directly by the registered agricultural
enterprise or sold to another export producer which uses such sold
product as a direct input in export products manufactured or processed
by it and subsequently exported, or to an export trader:cralaw:red
Provided, That the tax credit shall accrue to the registered
agricultural enterprise only after the other export producer or export
trader has in fact exported the products of the export producer or
those in the manufacture or processing of which such inputs were used.
b) Reduced Income Tax. — Registered agricultural
enterprises shall be entitled for the first five years from its
registration, to deduct from its taxable income an amount equivalent to
the sum of the direct labor cost and local raw materials utilized in
the manufacture of its export products. For projects with long
gestation, this period may be extended for another period of five years
by the Board upon recommendation of the Department or the appropriate
government agencies. Provided, however, That such deduction shall in no
case exceed twenty-five per cent (25%) of its total export revenue;
Provided, further, That in case of traditional exports, the local raw
material component shall not be included in computing the above
deduction.
Before registered agricultural enterprises may avail themselves of the
foregoing export incentives benefits, they shall apply first with the
Board, which shall approve the application upon proof: (1) that the
enterprise proposes to engage in good faith in creating a market for
its products abroad; (2) that the product to be exported is one
included in the government priorities plan as suitable for export, or
if not so included, that its export will not adversely affect the needs
of the domestic market for the finished product to be exported or for
the domestic raw materials used in its manufacture; (3) that the
enterprise has or will set up an adequate accounting system to
segregate revenues, purchases and expenses of its export market
operations from those of its domestic market operations; and (4) that
the exported products and commodities meet the standards of quality
established by the Bureau of Standards, or by the Board and the
Department jointly. chanroblesvirtualawlibrary
The Board may suspend or cancel wholly or partially the above deduction
under this Section whenever any action is threatened or taken by an
international association or foreign nation which would nullify the
purposes of said incentive and would impair or threaten to impair the
export trade of the Philippines or its relations with other nations.
c) The provisions of Presidential Decree No. 930 on
simplified export procedures shall apply to registered agricultural
enterprises under this Decree.
Section 9. Preference in Grant of Government Loans. —
Government financial institutions such as the Development Bank of the
Philippines, Philippine National Bank, Government Service Insurance
System, Social Security System, Land Bank, and such other government
institutions as are now engaged or may hereafter engage in financing or
investment operations shall, in accordance with and to the extent
allowed by the enabling provisions of their respective charters or
applicable laws, accord high priority to application for financial
assistance submitted by pioneer and other registered agricultural
enterprises, whether such financial assistance be in the form of equity
participation in preferred, common or preferred convertible shares of
stock, or in loans and guarantees, and shall facilitate the processing
thereof and the release of the funds therefor. However, no financial
assistance shall be extended under this Section to any investor of
enterprise that is not a Philippine national.
The above-mentioned financial institutions, to the extent allowed by
their respective charters or applicable laws, shall contribute to the
capital of a registered agricultural enterprise whenever the said
contribution would enable the formation of a pioneer or other
registered agricultural enterprise with at least sixty per cent (60%)
control by Philippine nationals: Provided, That the shares representing
the contribution of the said financial institution shall be offered for
public sale to Philippine nationals through all the members of a
registered Philippine stock exchange within a reasonable period after
such acquisition.
To facilitate the implementation of the provision of this Section, all
the said financial institutions shall coordinate their financial
assistance programs with each other, exchange relevant information
about applicants and applications and submit a monthly report to the
Board showing the amount of funds available for financial assistance to
pioneer or other agricultural registered enterprises. The Board shall
recommend to the Board of Directors of each such financial institution
what order of priority shall be given the applications of pioneer and
other registered agricultural enterprises, or of applicants that
propose to seek registration as such. chanroblesvirtualawlibrary
Section 10. Private Financial Assistance. —
Notwithstanding the provisions of Section one of Presidential Decree
No. 717 registered agricultural enterprises may be included as
beneficiaries of the ten per cent (10%) of a banking institution's
loanable funds set aside for agrarian reform credit: Provided, That
such registered agricultural enterprises secure the prior endorsement
of the Department of Agrarian Reform stating that land reform
beneficiaries shall benefit from the Agricultural enterprises projects.
Section 11. Loans for Investment. — The Government
Service Insurance System and the Social Security System shall extend to
their respective members five-year loans at a rate of interest not to
exceed six per cent per annum for the purchase of shares of stock in
any registered agricultural enterprise: Provided, That (1) the shares
so purchased shall be deposited in escrow with the lending institution
for the full five-year term of the loan; partial release of the shares
shall, however, be allowed to the extent of the payment of amortization
made therefor; (2) such loans shall be amortized in sixty equal monthly
installments which shall be withheld by the employer from the monthly
salary of the employee concerned and remitted to the lending
institution by the employer; but any and all dividends earned by shares
of stock while they are held in escrow shall be delivered to the
employee; and (3) the maximum loan available to each employee in any
calendar year shall not exceed fifty per cent (50%) of the employee's
annual gross income; Provided, further, That the total investment of
the government financial institution concerned, consisting of its
direct investment in the registered enterprise and the loans it has
extended to its members in a registered enterprise, shall not be more
than forty-nine per cent (49%) of the total capita
Section 12. Applicability to Existing Enterprises. —
An enterprise engaged in an activity listed in the Agricultural
Investment Priorities Plan at the time of its declaration shall be
entitled to registration of an expansion or enlargement thereof
requiring new or additional machinery and equipment or breeding stocks
and genetic materials within the unfilled measured capacity of the
area. An investor in such an enterprise shall also be entitled to
benefits and incentives to the extent of his additional investment
therein; Provided, That the application is filed while the area is
still in the Agricultural Investments Priorities Plan.
Existing registered enterprises under Republic Act No. 5186 and
Republic Act No. 6135; Republic Act 3470 as amended, Presidential
Decree 388 as amended, and Presidential Decree No. 175 which are
otherwise qualified to register under this Decree may transfer its
registration hereunder subject to the approval of the Board; Provided,
however, That a registered agricultural enterprise under this act which
is entitled to benefits under other laws shall not concurrently avail
of the incentive benefits accruing to its registered activity under
this Act and under other laws. chanroblesvirtualawlibrary
Section 13. Limitation on Incentives. — When a
registered agricultural enterprise engages in activities or endeavors
that have not been declared as preferred areas of investments under the
Agricultural Investments Incentives Act, the benefits and incentives
accruing under this Decree shall be limited to the portion of
activities of such enterprise that is duly registered. The incentive
deductions from taxable income under this Act may only be deducted from
the income of the registered activity and the tax credits and special
tax credits granted under this Act may only be used by the registered
enterprise to pay taxes, duties, charges and fees due to the national
government in connection with its registered operations.
All doubts concerning the benefits or incentives granted to enterprises
and investors shall be resolved in favor of the investors and
registered agricultural enterprises.
Section 14. Board of Investments. — The Board of
Investment shall implement the provisions of this Decree in accordance
with Sec. 16 of Republic Act 5186 not inconsistent with the provisions
of this Decree. More particularly, the Board shall:cralaw:red
a) Jointly with the Department of Agriculture, draw
up an annual Agricultural Investments Priority Plan. Said plan shall
contain a listing of specific agricultural activities which can qualify
for incentives under this Decree and shall be supported by studies of
existing and prospective demands for such products and services in the
light of the level and structure of income, production, trade, prices
and relevant economic and technical factors of the regions as well as
existing facilities. The Agricultural Investments Priorities Plan shall
be formulated and made effective in like manner as the priorities plan
of the Board of Investments. Whenever appropriate, reference to the
Investments Priorities Plan in the provisions of the aforesaid Republic
Act 5186 applicable herein shall also be construed to include the
Agricultural Investments Priorities Plan.
b) Jointly with the Department of Agriculture,
determine the measured capacity desirable in each preferred area of
investments. Measured capacity shall not be less than the amount by
which the measurable market demand exceeds the existing agricultural
productive capacity and services, including the industrial aspect of
food production, in the said preferred area, nor shall measured
capacity be so much in excess of measurable demand as to foster or
encourage overcrowding in such area. The Board and the Department shall
jointly review the declared measured capacity in each preferred area of
investment upon the attainment by registered enterprises of fifteen per
cent (15%) of said capacity. chanroblesvirtualawlibrary
c) Process and approve, imposing such terms and
conditions as it may deem necessary to promote the objectives of this
Decree, including refund of incentives availed or to be availed of by
an enterprise in amounts to be determined by the Board, applications
for registration under this Decree, and issue the proper certificate of
registration upon payment of the necessary fees, which shall not exceed
two hundred pesos.
d) Generally, exercise all the powers necessary or
incidental to attain the purpose of this Act.
Section 15. Tax Credits. — Credit against taxes
and/or duties extended to a registered enterprise pursuant to this
Decree shall be evidenced by a tax credit certificate issued by the
Secretary of Finance. Unless otherwise provided herein, the tax credit
certificate may be used by the registered enterprise to pay taxes,
duties, charges and fees due to the National Government in connection
with its registered operations. A tax credit certificate shall be
non-transferable; it may enjoy the benefits and incentives provided for
in this Decree, Provided, the use thereof will not result in a refund.
Section 16. Compliance with General Order No. 47 and
Presidential Decree No. 472. — Registered companies covered by General
Order 47 and Presidential Decree 472 undertaking any of the areas of
investments in the Agricultural Investments Priorities Plan and such
registration shall be deemed to be in compliance with the
aforementioned General Order and Presidential Decree.
Section 17. Effect of the Investment Incentives Act.-
The provisions of Republic Act 5186, known as the Investment Incentives
Act, in so far as applicable and when not inconsistent with the
provisions of this Decree shall apply to enterprises registered under
this Decree.
Section 18. Exemption from Investment Limitation
Provision of the Corporation Law. — Notwithstanding the provisions of
Sec. 13, subsection 5 of Republic Act No. 1459, otherwise known as the
Corporation Law, registered agricultural enterprises, individuals and
non-agricultural corporations may invest more than fifteen per cent
(15%) of the capital stock in a registered agricultural enterprise.
Section 19. Qualification of Applicants. — To be
entitled to registration, an applicant must satisfy the Board that:cralaw:red
a) It is engaged or proposing to engage in
agricultural production, in food processing or the industrial aspects
of food production if substantially integrated with agricultural
production, and in related services or facilities necessary to support
agricultural production including specialized transport, handling and
storage of products and by-products arising out of such production
declared as a preferred area of investment under the Agricultural
Investments Priorities Plan. In the case of a corporation, at least
sixty per cent (60%) of the capital stock outstanding and entitled to
vote is owned and held by Philippine nationals, and at least sixty per
cent (60%) of the members of the Board of Directors are citizens of the
Philippines and in the case of the other entities, the ownership and
management thereof shall be by Philippine nationals. In case the
Corporation does not possess the required degree of ownership by
Philippine nationals, the following circumstances must be
satisfactorily established.
1) That it proposes to engage in a pioneer project
that is in accordance with this Act which, considering the nature and
extent of capital requirements, processes, technical skills, national
importance and relative business risks involved, is in the opinion of
the Board of such a nature that the available measured capacity thereof
cannot be readily and adequately filled by Philippine nationals. chanroblesvirtualawlibrary
2) That it obligates itself to attain the status of a
Philippine national, as defined in paragraph (a) of this section within
thirty (30) years from the date of registration by having its shares of
stock listed with a Philippine stock exchange within fifteen (15) years
from the date of registration and actually offering for sale the said
shares to Philippine nationals immediately after the said period:
Provided, however, That in case of a registered enterprise exporting at
least seventy per cent (70%) of its total production, it shall attain
the status of a Philippine national within forty years (40) from date
of registration by listing its shares of stock within twenty-five (25)
years from date of registration and actually selling its shares after
the said period: Provided, further, That the Board may extend this
period for another ten (10) years, subject to such conditions as it may
impose in the national interest, and upon proof by the registered
enterprise that it has exerted its best efforts to sell the required
number of shares to Philippine nationals, as required by this Section
but have not sold the same, and for such other cause as the Board may
deem sufficient to justify the extension of the period.
3) That the pioneer area it will engage in is one
that is not within the activities reserved by the Constitution or other
laws of the Philippines to Filipino citizens or corporations owned or
controlled by Filipino citizens.
b) The enterprise is capable of operating on a sound
and efficient basis and of contributing to the national development of
the preferred or pioneer area in particular and of the national economy
in general; chanroblesvirtualawlibrary
c) If the enterprise is engaged or proposes to engage
in undertakings or activities other than preferred or pioneer projects,
in addition to projects mentioned in subsection (a) hereof, it has
installed or undertake to install an accounting system adequate to
identify the investments, revenues, costs, and profits or losses of
each preferred or pioneer project undertaken by the enterprise
separately from the aggregate investment, revenues, costs, and profits
or losses of the whole enterprise or to establish a separate
corporation for each preferred or pioneer project if the Board should
so require to facilitate proper implementation of this Decree.
Notwithstanding the provisions of this Section, if the measured
capacity of any preferred area is not filled within three years from
the date of its declaration as such, the Board shall allow enterprises
not possessing the required percentage of Philippine ownership and
control, but otherwise qualified, to be registered in such areas, under
the conditions prescribed above for pioneer areas.
Section 20. Special Assistance to Individual
Applicants. — To facilitate the implementation of the provisions of
this Decree, and to expedite action on any application, particularly to
individual applicants, or such related matters in pursuit of the
registered activity, the Department and such other government agencies
concerned are hereby directed to extend and provide the necessary
assistance, and for this purpose the Board shall train and deputize
personnel assigned therefor.
Section 21. Appropriations. — There is hereby
appropriated out by any funds in the National Treasury not otherwise
appropriated the sum of One Million Pesos each for personnel and other
expenses of the Board and the Department to carry out the purposes of
this Decree for the first year of operation. Thereafter, the necessary
appropriations shall be included in the annual General Appropriations
Act allocable to the Board and the Department.
Section 22. Repealing Clause. — All laws, executive
orders, administrative orders, rules and regulations, or parts thereof
inconsistent with the provisions of this Decree are hereby repealed or
modified accordingly.
Section 23. Separability Clause. — The provisions of
this Decree are hereby declared to be separable, and in the event one
or more of such provisions are declared unconstitutional, the validity
of other provisions shall not be affected. chanroblesvirtualawlibrary
Section 24. Effectivity. — This Decree shall take
effect upon its approval. chanroblesvirtualawlibrary
Approved: June 3, 1977
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