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Chan Robles Virtual Law Library
PRESIDENTIAL DECREE NO. 1590
PRESIDENTIAL DECREE NO. 1590 - AN
ACT GRANTING A NEW FRANCHISE TO PHILIPPINERLINES, INC. TO ESTABLISH,
OPERATE, AND MAINTAINR-TRANSPORT SERVICES IN THE PHILIPPINES AND OTHER
COUNTRIES
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chanroblesvirtualawlibrary
WHEREAS,
the ownership, control and management of Philippinerlines, our national
flag carrier, have been reacquired by the Government;chanroblesvirtualawlibrary
WHEREAS, the franchise granted to Philippinerlines, Inc. by virtue of
Act No. 4271, as amended, will expire in November 1985; chanroblesvirtualawlibrary
WHEREAS, there is a need to grant Philippinerlines, Inc. a new
franchise to establish, operate, and maintainr-transport services
within the Philippines and between the Philippines and other countries.
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. There is hereby granted to
Philippinerlines, Inc., hereinafter referred to as the grantee, a
franchise to establish, operate, and maintain transport services for
the carriage of passengers, mail, and property byr in and between any
and all points and places throughout the Philippines, and between the
Philippines and other countries. chanroblesvirtualawlibrary
Section 2. Excepting case of force majeure and
whenever weather conditions permit, the grantee shall maintain
scheduled and/or nonscheduled and/or charterr-transport services in and
between any and all points and places throughout the Philippines as
well as between the Philippines and other countries at such frequencies
as traffic needs may require.
Section 3. The grantee shall fix just and reasonable
rates for the transportation of passengers, mail, and freight, subject
to the regulations and approval of the Civil Aeronautics Board or such
other regulatory agency as the Government may designate for this
purpose. Any order of the Civil Aeronautics Board made under this
Sections shall be subject to review by the courts.
Allrcrafts by the grantee and the flight-crew members operating
suchrcraft shall be licensed by the Government of the Philippines and
together with its accessories and equipment shall at all times be
inrworthy condition; they shall be equipped with radio communication,
safety and other equipment, and shall be operated and maintained in
accordance with the regulations and technical requirements of the Civil
Aeronautics Administration or such other regulatory body as the
Government may prescribe for this purpose. chanroblesvirtualawlibrary
The grantee's equipment and the operation of such equipment shall at
all times be subject to inspection and regulation by the Civil
Aeronautics Administration whose decisions on technical matters shall
be binding until revoked or annulled by superior authority under whose
control this office falls or by the courts for excess, or abuse of
jurisdiction.
The grantee shall comply with the provisions of Republic Act Numbered
Seven Hundred And Seventy-Six, and the regulations promulgated
thereunder from time to time.
Section 4. Subject to such terms and conditions as
the Philippine Government may prescribe, the grantee may use landing
and otherrport facilities on land or water as may be maintained or
owned by the Government within the Philippines on the grantee's lines,
excepting those which in the opinion of said Government may not be used
by the grantee because of military or naval considerations, and,
reciprocally, the Philippine Government shall have the right to use the
landing and otherrport facilities on land or water maintained or owned
by the grantee in the Philippines.
Section 5. The grantee shall have the right, at its
terminals and landing fields as well as in itsrcraft, to construct,
operate and maintain stations or transmitting sets for wireless
telegraphy and direction finding, and other radiods tor navigation
using wave lengths as shall be in accordance with the rules and
regulations made from time to time by the Philippine Government; but
the wireless communication facilities shall be used solely for
receiving and transmitting weather forecasts and messages releasing to
the grantee'srcraft and other matters in connection with the grantee's
services.
Section 6. The grantee is authorized to enter into
transportation contracts with the Philippine Government, including the
carrying of mail, upon terms and conditions to be mutually agreed upon.
The grantee shall give preferential considerations to contracts with
the Philippine Government, and, reciprocally, the latter shall give
preferential considerations to contracts with the grantee in the
carrying of passengers, mail, and freight.
Section 7. In case of war, insurrection, domestic
trouble, public calamity, or national emergency, the Philippine
Government upon order of the President shall have the right to take
over and operate the equipment of the grantee, paying just compensation
for such use or damages.
Section 8. The grantee shall be subject to the laws
of the Philippines now existing or hereafter enacted.
Section 9. With the approval of the President of the
Philippines, and subject to the limitations and procedure prescribed by
law, the grantee shall be authorized to exercise the right of eminent
domain as may be reasonably necessary for its stations and other
structures in connection with the grantee's activities and operations.
No private property shall be taken for any purpose by the grantee
without proper condemnation proceedings and just compensation paid or
tendered therefor, and any authority to take and occupy land contained
herein shall not apply to the taking, use, or occupation of any land
except as is required for the actual purposes for which this franchise
is granted.
Section 10. The grantee shall not issue stock or
bonds except in exchange for actual cash or for property at least equal
in value to the par value of the stock or bonds so issued; provided,
however, that it may issue stock, bond, or property dividends upon
compliance with the requirements of applicable existing laws. chanroblesvirtualawlibrary
Section 11. It shall be unlawful for the grantee to
use, employ, or contract for the labor of persons held in involuntary
servitude.
Section 12. The grantee shall hold the national,
provincial, and municipal governments of the Philippines harmless from
all claims, accounts, demands, or actions arising out of accidents or
injuries, whether to property or to persons, caused by the operation of
the services under the franchise hereby granted.
Section 13. In consideration of the franchise and
rights hereby granted, the grantee shall pay to the Philippine
Government during the life of this franchise whichever of subsections
(a) and (b) hereunder will result in a lower tax:cralaw:red
(a) The basic corporate income tax based on the
grantee's annual net taxable income computed in accordance with the
provisions of the National Internal Revenue Code; or
b) A franchise tax of two per cent (2%) of the gross
revenues derived by the grantee from all sources, without distinction
as to transport or nontransport operations; provided, that with respect
to internationalr-transport service, only the gross passenger, mail,
and freight revenues from its outgoing flights shall be subject to this
tax.
The tax paid by the grantee under either of the above alternatives
shall be in lieu of all other taxes, duties, royalties, registration,
license, and other fees and charges of any kind, nature, or
description, imposed, levied, established, assessed, or collected by
any municipal, city, provincial, or national authority or government
agency, now or in the future, including but not limited to the
following: chanroblesvirtualawlibrary
(1) All taxes, duties, charges, royalties, or fees
due on local purchases by the grantee of aviation gas, fuel, and oil,
whether refined or in crude form, and whether such taxes, duties,
charges, royalties, or fees are directly due from or imposable upon the
purchaser or the seller, producer, manufacturer, or importer of said
petroleum products but are billed or passed on the grantee either as
part of the price or cost thereof or by mutual agreement or other
arrangement; provided, that all such purchases by, sales or deliveries
of aviation gas, fuel, and oil to the grantee shall be for exclusive
use in its transport and nontransport operations and other activities
incidental thereto;chanroblesvirtualawlibrary
(2) All taxes, including compensating taxes, duties,
charges, royalties, or fees due on all importations by the grantee
ofrcraft, engines, equipment, machinery, spare parts, accessories,
commissary and catering supplies, aviation gas, fuel, and oil, whether
refined or in crude form and other articles, supplies, or materials;
provided, that such articles or supplies or materials are imported for
the use of the grantee in its transport and transport operations and
other activities incidental thereto and are not locally available in
reasonable quantity, quality, or price;chanroblesvirtualawlibrary
(3) All taxes on lease rentals, interest, fees, and
other charges payable to lessors, whether foreign or domestic,
ofrcraft, engines, equipment, machinery, spare parts, and other
property rented, leased, or chartered by the grantee where the payment
of such taxes is assumed by the grantee;chanroblesvirtualawlibrary
(4) All taxes on interest, fees, and other charges on
foreign loans obtained and other obligations incurred by the grantee
where the payment of such taxes is assumed by the grantee;chanroblesvirtualawlibrary
(5) All taxes, fees, and other charges on the
registration, licensing, acquisition, and transfer ofrcraft, equipment,
motor vehicles, and all other personal and real property of the
grantee; and
(6) The corporate development tax under Presidential
Decree No. 1158-A.
The grantee, shall, however, pay the tax on its real property in
conformity with existing law.
For purposes of computing the basic corporate income tax as provided
herein, the grantee is authorized:cralaw:red
a. To depreciate its assets to the extent of not
more than twice as fast the normal rate of depreciation; and chanroblesvirtualawlibrary
b. To carry over as a deduction from taxable income
any net loss incurred in any year up to five years following the year
of such loss.
Section 14. The grantee shall pay either the
franchise tax or the basic corporate income tax on quarterly basis to
the Commissioner of Internal Revenue. Within sixty (60) days after the
end of each of the first three quarters of the taxable calendar or
fiscal year, the quarterly franchise or income-tax return shall be
filed and payment of either the franchise or income tax shall be made
by the grantee.
A final or an adjustment return covering the operation of the grantee
for the preceding calendar or fiscal year shall be filed on or before
the fifteenth day of the fourth month following the close of the
calendar or fiscal year. The amount of the fiscal franchise or income
tax to be paid by the grantee shall be the balance of the total
franchise or income tax shown in the final or adjustment return after
deducting therefrom the total quarterly franchise or income taxes
already paid during the preceding first three quarters of the same
taxable year. chanroblesvirtualawlibrary
Any excess of the total quarterly payments over the actual annual
franchise of income tax due as shown in the final or adjustment
franchise or income-tax return shall either be refunded to the grantee
or credited against the grantee's quarterly franchise or income-tax
liability for the succeeding taxable year or years at the option of the
grantee.
The term "gross revenues" is herein defined as the total gross income
earned by the grantee from; (a) transport, nontransport, and other
services; (b) earnings realized from investments in money-market
placements, bank deposits, investments in shares of stock and other
securities, and other investments; (c) total gains net of total losses
realized from the disposition of assets and foreign-exchange
transactions; and (d) gross income from other sources.
Section 15. This franchise shall not be interpreted
to mean an exclusive grant of the privileges herein provided for.
However, in the event that any competing individual, partnership, or
corporation shall receive a similar permit or franchise with terms
and/or provisions more favorable than those herein granted or which
tend to place the grantee herein at any disadvantage, then such term
and/or provision shall, ipso facto, become part hereof and shall
operate equally in favor of the grantee herein.
Section 16. This franchise is granted with the
understanding that it shall be subject to amendment, alteration, or
repeal by competent authority when the public interest so requires.
Section 17. The term of this franchise shall be fifty
(50) years from the date of the acceptance of this franchise by the
grantee. chanroblesvirtualawlibrary
Section 18. The provisions of existing laws to the
contrary notwithstanding, the grantee is hereby authorized, without
need of approval by or clearance from any government agency, to hire or
employ foreign nationals with special qualification, competence, or
experience who are needed by the grantee for the efficiency and
improvement of its operations and other business activities; provided,
that notice of such employment shall be given by the grantee to all the
government agencies concerned and such foreign national shall register
with the Commission on Immigration and Deportation within thirty (30)
days from the date of such employment.
Section 19. The grantee is hereby authorized to
contract loans and credits in any convertible foreign currency and
incur indebtedness from time to time from foreign governments, foreign
banks, or any foreign or international financial, institution or fund
sources, or to issue bonds, notes, debentures, and other evidences of
indebtedness under such terms and conditions as it shall deem
appropriate for the accomplishment of its purpose.
The loans, credits, indebtedness contracted under this Section by the
grantee, and the payment of the principal, interest, fees, and other
charges thereon shall be exempt from any and all taxes, including
withholding tax; provided, that the liability for the payment of such
taxes is assumed by the grantee.
The Republic of the Philippines hereby unconditionally guarantees the
payment of the principal of and interest, fees, and other charges on or
arising from or in connection with the foreign loans, credits, bonds,
debentures, notes, and other evidences of indebtedness issued or
incurred by the grantee under this Section and shall pay the same in
the event the grantee fails to do so. In such event, the Republic of
the Philippines shall succeed to all the rights of the creditors and/or
holders of such bonds, debentures, notes, or other evidences of
indebtedness to the extent of the payment made, unless and until the
sum so paid by the Republic of the Philippines is refunded by the
grantee. The instrument of guarantee shall be executed by the President
or by his duly-designated representative on behalf of the Republic of
the Philippines. chanroblesvirtualawlibrary
Section 20. All rentals, interest, fees, and other
charges paid by the grantee to foreign or domestic lessors for the
lease ofrcraft, engines, spare parts, other flight or ground equipment,
and other personal property shall be exempt from all taxes, including
withholding tax; provided, that the liability for the payment of said
taxes is assumed by the grantee.
The Republic of the Philippines hereby unconditionally guarantees the
due and faithful performance by the grantee of its obligations under
lease contracts entered into by the grantee with foreign lessors,
including the prompt payment of all rentals, interest, fees, and other
charges thereunder, and shall pay the same in case the grantee fails to
do so. The instrument of guarantee shall be executed by the President
of his duly-designated representative on behalf of the Republic of the
Philippines.
The term "foreign lessor" shall be construed to apply to a foreign
entity or alien individual, whether resident or nonresident, which
enters into a lease contract with the grantee for the lease ofrcraft,
engines, spare parts, other flight or ground equipment, and other
personal property wherein the rentals, interest, fees, or charges are
denominated or payable in foreign currency. chanroblesvirtualawlibrary
Section 21. The provisions of existing laws to the
contrary notwithstanding, the Budget Commissioner and/or the National
Treasurer are hereby authorized to offset any outstanding obligation of
the grantee to any agency or instrumentality of the Government with any
receivable of the grantee from any agency or instrumentality of the
Government.
Section 22. The grantee shall not, without the
previous approval of the President of the Philippines, lease, transfer,
grant the usufruct of, sell, or assign this franchise and the rights
and privileges acquired thereunder to any person, firm, company
corporation, or other mercantile or legal entity, nor merge with any
other company or corporation organized for the same or any other
purpose. Any corporation to which this franchise may be sold,
transferred, or assigned or with which the grantee may merge, with the
approval above mentioned, shall be subject to the corporation laws of
the Philippines now existing or hereafter enacted, any person, firm,
company, corporation, or other commercial or legal entity to which this
franchise is validly sold, transferred, or assigned or with which the
grantee may merge, shall be subject to all the conditions, terms,
restrictions, and limitations of this franchise as fully and completely
and to the same extent as if this franchise had been originally granted
to such person, firm, company, corporation, or other commercial or
legal entity.
Section 23. If any section or provision of this
franchise, as amended, is held or declared unconstitutional or invalid
by a competent court in a final judgment, and the other sections or
provisions hereof shall continue to be in force as if the section or
provision so annulled or voided had never been incorporated in this
franchise.
Section 24. This franchise, as amended, or any
section or provision hereof may only be modified, amended, or repealed
expressly by a special law or decree that shall specifically modify,
amend, or repeal this franchise or any section or provision thereof.
Section 25. All laws, decree, orders, instructions,
and rules and regulations or parts thereof which are inconsistent
herewith are hereby repealed or modified accordingly.
Section 26. This Decree shall take effect immediately
and shall form part of the law of the land.
DONE in the City of Manila,
this 11th day of June, in the year of Our Lord, nineteen hundred and
seventy-eight.
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