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PRESIDENTIAL DECREE NO. 1294
PRESIDENTIAL DECREE NO. 1294 - AN
ACT AMENDING THE ACT GRANTING A FRANCHISE TO PHILIPPINERLINES, INC.
OTHERWISE KNOWN AS PUBLIC ACT NO. 4271, AS AMENDED
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WHEREAS,
the ownership, control, and management of Philippinerlines, Inc. have
been acquired by the Government;chanroblesvirtualawlibrary
WHEREAS, there is an urgent need to assist and support our National
Flag Carrier in improving and expanding the domestic and international
services it provides the general public and to make its operations
financially sound and economically viable to effect the desired social
and economic development of our country;chanroblesvirtualawlibrary
WHEREAS, because of the high cost of modernrcraft and other equipment
which are necessary to adequately cope with increasing domestic and
international traffic demand and the inadequacy of domestic capital
resources, Philippinerlines, Inc. has to avail of foreign loans for the
acquisition of suchrcraft, machineries and equipment;chanroblesvirtualawlibrary
WHEREAS, foreign lenders of such foreign loans invariably require
Philippinerlines, Inc. to assume payment of the corresponding tax on
interests and charges on such loans;chanroblesvirtualawlibrary
WHEREAS, because of the high costs of modern flight equipment and
inadequacy of local capital sources, the National Flag Carrier has to
resort to leases of such flight equipment at prohibitive costs due to
the imposition of the withholding and other taxes on the rentals
payable to foreign lessors which invariably require Philippinerlines to
absorb and assume the payment of such taxes;chanroblesvirtualawlibrary
WHEREAS, it is a common practice in the internationalrline industry
forrline companies to lease flight and other equipment; chanroblesvirtualawlibrary
WHEREAS, in order to assist the National Flag Carrier in maintaining a
favorable competitive position vis-a-vis foreignrlines in the
international routes, and to adequately meet the increasing demand of
domestic and international traffic in line with the tourism program of
the Government, it is necessary to make available to the National Flag
Carrier foreign loans at the lowest possible cost and it becomes
imperative that modernrcraft and other equipment be made available to
Philippinerlines, Inc. by reducing the cost of acquiring suchrcraft and
other equipment through lease arrangements.
NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Philippines,
by virtue of the powers in me vested by the Constitution, do hereby
decree and order the following:cralaw:red
Section 1. Section 13 of the Act shall be amended to
read as follows:cralaw:red
"Sec. 13. In consideration of the franchise and
rights hereby granted, the grantee shall be taxable as provided under
subsections (a) or (b), hereunder whichever will result in a lower tax:cralaw:red
(a) A tax payable quarterly of 2% on the gross
revenues of the grantee from domestic operations plus its gross
revenues derived from its outgoing freight and passenger operations;
or chanroblesvirtualawlibrary
(b) The basic corporate income tax based on the
grantee's worldwide income is provided under Section 24 (a) of the
National Internal Revenue Code, it being understood that the corporate
development tax as imposed by Presidential Decree No. 1158-A shall not
apply to the grantee.
The tax paid by the grantee in any of the above alternatives
shall be in lieu of all taxes, duties, fees, and licenses of any kind,
nature or description, levied, established or collected by any
municipal, provincial or Nationality authority; Provided, That the
grantee shall pay the tax or its real property in conformity with
existing law."
Section 2. The Act is hereby amended by adding
Section 25 which shall read as follows: chanroblesvirtualawlibrary
"Sec. 25. Foreign Loans. — The Corporation is hereby
authorized to contract loans, credits in any convertible foreign
currency or capital goods, and indebtedness from time to time from
foreign governments, foreign banks or any international financial
institutions or funds sources, or to issue bonds, on such terms and
conditions as it shall deem appropriate for the accomplishment of its
purposes and to enter into and execute agreements and other documents
specifying such terms and conditions.
The loans, credits, and indebtedness contracted under this
Section by the grantee, and the payment of the principal, interests,
and other charges thereon shall be exempt from withholding tax provided
that the liability for the payment of the taxes on such interests and
other charges has been assumed by the grantee. chanroblesvirtualawlibrary
The Republic of the Philippines hereby guarantees the payment of
both the principal and the interest of the foreign loans, bonds,
debentures, collaterals, notes or such other obligations issued or
incurred by the grantee by virtue of the preceding paragraph and shall
pay such principal and interest in case the grantee fails to do so. In
such event, the Republic of the Philippines shall succeed to all the
rights of the holders of such bonds, debentures, collaterals, notes or
other instruments to the extent of the payment made, unless the sum so
paid by Republic of the Philippines shall be refunded by the grantee
within a reasonable time."
Section 3. The Act is further amended by adding
Section 26 which shall read as follows:cralaw:red
"Sec. 26. Rental on Leasedrcraft and Equipment. — All
rentals, fees or charges paid to foreign lessors by the grantee for the
lease ofrcraft, engines, and other equipment shall be exempt from all
taxes, provided that the liability for said taxes has been assumed by
the grantee.
The term "foreign lessor" shall be construed to apply to a
foreign corporation, whether resident or nonresident, which enters into
a lease contract with the grantee for the lease ofrcraft, engines, and
other equipment wherein the rentals, fees, or charges are denominated
or payable in foreign currency." chanroblesvirtualawlibrary
Section 4. All acts, decrees, orders, instructions,
and rules and regulations or parts thereof which are inconsistent
herewith are hereby revoked or modified accordingly.
Section 5. This Act shall take effect immediately and
shall form part of the law of the land.
Done in the City of
Manila, this 27th day of January, in the year of Our Lord, nineteen
hundred and seventy-eight.
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