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PRESIDENTIAL DECREE NO. 1657
PRESIDENTIAL DECREE NO. 1657 -
AMENDING SectionS 3, 4, 5, 8 AND 11 OF PRESIDENTIAL DECREE NO. 1167
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WHEREAS,
there are various incentives administered by a number of government
agencies which incentives may be availed of by Filipino construction
contractors undertaking overseas projects;chanroblesvirtualawlibrary
WHEREAS, it is highly desirable for efficient administration that all
incentives available to overseas construction projects or export of
construction services administered by a single government agency;chanroblesvirtualawlibrary
WHEREAS, experience in implementation so far has indicated the need for
organizational adjustments and the importance of flexibility in
altering or modifying some incentives to make them more responsive to
changes occurring in the overseas markets and the domestic economy.
NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Philippines,
by virtue of the powers vested in me by the Constitution do hereby
order and decree the following:cralaw:red
Section 1. Section 3 subsection (c) of Presidential
Decree No. 1167 is hereby amended to read as follows:cralaw:red
"c. "Overseas Project" shall mean a construction or
consultancy project undertaken by a contractor or consultant outside
the territorial boundaries of the Philippines; the term shall include
overseas works which are in support of and necessary to construction
undertakings."
Section 2. Section 3 of Presidential Decree No. 1167
is hereby further amended by the addition of subsection "f" which shall
read as follows:cralaw:red
"f. "Gross Contract Price" shall refer to income,
revenues, or receipts derived by a contractor from an overseas project."
Section 3. Section 4 of Presidential Decree No. 1167
is hereby amended to read as follows:cralaw:red
"Sec. 4. Incentives for Filipino Overseas
contractors. — a duly registered Filipino contractor who is engaged in
an overseas project shall be granted, at his option, the incentives
provided in subsection (a) and (b) or in subsection (c), or in
subsection (d) of this section.
a) Tax credit. — (1) Taxes paid pay the Filipino
contractor to foreign governments on income derived from overseas
projects subject, however, to the limitation of section 30 (c) 4 (a)
and (b) of the National Internal Revenue Code; chanroblesvirtualawlibrary
(2) Tax credit for taxes withheld on interest
payments on foreign loans incurred directly and exclusively for
overseas projects: Provided, That (i) no such credits is enjoyed by the
lender-remittee in his country; and (ii) the overseas contractor has
assumed the liability for payment of the tax due from the
lender-remittee; and
(3) Tax credit equivalent to the sales taxes paid on
domestically manufactured or produced materials or products which are
purchased by the overseas contractor and actually exported by him to be
used in his overseas projects: Provided, That the sales taxes are
indicated as separate item on the sales invoice of the manufacturer or
producer.
b) Deduction From Gross Overseas Income. — (1)
Accelerated depreciation — At the point of the Filipino contractor and
in accordance with the procedures established by the Bureau of Internal
Revenue fixed assets actually used in overseas operation may be: (i)
depreciated to the extent of not more than twice as fast as the normal
rate of depreciation if expected thereof is ten (10) years or less; or
(ii) depreciated over any number of years, between five (5) years and
expected life if the latter is more than ten (10) years. Such
depreciation cost as may be chosen by the said taxpayer shall be
allowed as a deduction from the taxable income: Provided, That he
notifies the Bureau of Internal Revenue at the beginning of the
depreciation period which depreciation rate allowed by this Section
will be used by him;chanroblesvirtualawlibrary
(2) Additional deduction of labor training expense. —
An additional deduction from taxable income of one half of the value of
labor training expenses incurred for improving the performance and
efficiency of unskilled labor: Provided, That such training program is
duly approved by the Department of Labor: Provided, further, That such
deduction shall not exceed ten percent (10%) of the direct labor wage;
and chanroblesvirtualawlibrary
(3) Net operating loss carry over. — a net operating
loss incurred on overseas projects in any year of operation may be
carried over as a deduction from taxable income earned from overseas
projects, within the three (3) years immediately following the year of
such loss: Provided, That the loss carried over is computed net of
incentives herein granted: Provided, further, That no impairment of
loans or guarantees extended by the Philippine Government or any of its
instrumentalities has occurred or will occur as a result of overseas
construction operations during the taxable year. The net operating loss
shall be computed in accordance with the procedures established by the
Bureau of Internal Revenue and shall be allowed only for purposes of
income declaration in the Philippines.
c) In lieu of the income tax payable as a result of
the application of the incentives provided for in the preceding
subsection, the Filipino contractor may elect to pay a one and one-half
percent (1-1/2%) tax on his gross contract price less any portion
subcontracted to another registered Filipino contractor.
d) A registered contractor may for the first five (5)
years from registration with the Philippine Overseas Construction Board
or with the Board of Investments as service exporter under R. A. 6135,
whichever was earlier, be entitled to deduct from its taxable income an
amount equivalent to fifty per cent (50%) of its total export fees
during the year in which the incentives is claimed: Provided, That to
be entitled to this deduction, the registered contractor must have
remitted or repatriated to the Philippines in acceptable currencies its
total export fees earned during the year in which the incentive is
claimed less reasonable costs and expenses incurred or payable in
foreign currencies, under such Rules and Regulations as the Monetary
Board may prescribe; Provided, further, That contractors registered
with the Board of Investments as service exporters may elect within one
year from the effectivity of this Decree, to avail of the incentives
either in subsection (a) and (b) or subsection (c), instead of
continuing to avail of incentives under this subsection. chanroblesvirtualawlibrary
Any contractor who elects to avail of the incentives provided in
subsection (d) above shall not be qualified to avail of the incentives
provided in subsections (a) and (b) (c) above even after the expiration
of the period of availment under subsection (d)."
Section 4. Section 5 of Presidential Decree No. 1167
is hereby amended to read as follows:cralaw:red
"Sec. 5. Internationally-bid local projects. — The
incentives provided in subsections (a) and (b) of the preceding Section
4, shall be available to Filipino contractors participating as
principals in projects that are internationally-ibid and
foreign-assisted under such rules and regulations as shall be
promulgated by the Board." chanroblesvirtualawlibrary
Section 5. Section 8 of Presidential Decree No. 1167
is hereby amended to read as follows:cralaw:red
"Sec. 8. There is hereby created a body to be called
the Philippine Overseas Construction Board" to implement the policies
enunciated in this Decree. The Board shall be composed of five (5)
members to be appointed by the President of the Philippines. The
President of the Philippines shall appoint a Chairman from among the
five members. The members of the Board shall serve for a term of three
(3) years or until their successors shall have been appointed. In case
of any vacancy in the Board, the same shall be filled by the President
of the Philippines for the unexpired term." chanroblesvirtualawlibrary
Section 6. Section 11 of Presidential Decree No. 1167
is hereby amended by the addition of subsections "m" and "n" which
shall read as follows:cralaw:red
"m. Recommend to the President in meritorious cases,
the liberalization of incentives granted by the Board under
Presidential Decree No. 1167; the President may in the interest of
national socio-economic development and general welfare liberalize the
incentives enumerated in the said Presidential Decree.
"n. Recommend reduction, suspension, or elimination
of incentives to the President, who in the interest of general welfare
and development may reduce, suspend or eliminate the enjoyment of any
of the incentives administered by the Philippine Overseas Construction
Board. Such reduction, suspension, or elimination shall not effect
projects previously authorized or approved by the Board prior to such
action."
Section 7. Effective this date, and subject to
Section "3" above, incentives for overseas construction projects or
export of construction services may be availed of only through the
Philippine Overseas Construction Board.
Section 8. Any and laws, decrees, rules and
regulations or parts thereof inconsistent herewith are hereby repealed
or modified accordingly.
Section 9. This Decree shall take effect immediately.
DONE in the city of Manila this
19th day of December, in the year of Our Lord nineteen hundred and
seventy-nine.
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