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PRESIDENTIAL DECREE NO. 2032
PRESIDENTIAL DECREE NO. 2032
- DECLARING NATIONAL POLICIES ON AGRICULTURAL DEVELOPMENT AND
PROMULGATING THE AGRICULTURAL INCENTIVES ACT OF 1986
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chanroblesvirtualawlibrary
(REPEALED
BY EOA 226)
WHEREAS, there is indispensable need to provide the essential impetus
for agricultural development and incentives; chanroblesvirtualawlibrary
WHEREAS, the primacy of agricultural development and incentives
necessities urgent and immediate concern by way of implementation;chanroblesvirtualawlibrary
NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Republic of
the Philippines, by virtue of the powers vested in me by the
Constitution, do hereby ordered and decree the following:cralaw:red
CHAPTER I
DECLARATION OF POLICY
Section 1. Declaration of Agricultural Development
and Investment Objectives and Policies. —chanroblesvirtualawlibrary
A. Objectives: It is the basic
objective of the State to promote agricultural development on a
sustainable basis utilizing indigenous materials whenever feasible, and
in particular to achieve the following objectives:cralaw:red
1. To preserve, improve and put to their most
productive use the land, water, forest, genetic materials and other
agricultural resources of the country.
2. To manage and develop the land so that the land is
put to its optimal uses, and the security of land tenure is guaranteed.
In particular, it is the policy of the State to strengthen the
capability for land classification; to complete the cadastral surveys
and land titling as quickly as feasible; to regulate the diversion of
agricultural land to industrial and urban uses; to facilitate agrarian
reform and stabilize land tenure; and to improve and expand the
resettlement program in order to accommodate the growing number of
landless farmers.
3. To ensure the availability of food supplies at
reasonable prices and attain self-sufficiency in basic food items.
4. To accelerate the development of the meat and
dairy industry, and for this purpose, grazing and credit policies shall
be consistent with the evolving requirements of the industry.
5. To enhance the judicious and optimum utilization
of our marine and fishery resources by both the commercial fishing boat
operators and the municipal/small fishermen, as well as expand and
improve fishpond operations and aquaculture activities.
6. To increase agriculture's contribution to the
balance of payments through export promotion and import substitution.
7. To provide adequate research and extension
facilitiesmed at increasing productivity and efficiency, including
incentives for the private sector to invest therein.
8. To encourage and assist small and medium-sized
agricultural farms and industries as well as large industrial ventures
intended to achieve economies of scale in all agricultural farms and
agro-industrial ventures.
9. To accelerate the development of less developed
regions of the country.
10. To improve and stabilize farmers' income and
farmers' welfare through higher productivity, better processing,
storage, marketing, transport and communications facilities, and a more
efficient system of rural community developmentmed at meeting family
needs.
B. Policies: To carry out the
objectives of this Decree the following principles are hereby adopted:cralaw:red
1. Market intervention and pricing policy shall bemed
primarily at increasing production by providing reasonable and stable
prices to farmers, so that the private sector becomes the primary
implementor and beneficiary of agricultural development.
2. An adequate level of farm inputs, preferably
indigenous materials, shall be provided at reasonable prices.
2. Agricultural credit at reasonable costs shall be
mobilized and delivered at the levels necessary to support the
development program, both through the rehabilitation of existing
institutions and through the creation of new institutions and systems.
4. A program of organizational and institutional
improvements for more efficient sector management shall be
instituted,med at improving and rationalizing coordination among the
ministries, agencies and other government entities involved in
agriculture.
CHAPTER II
DEFINITION OF TERMS
Section 2. Definition of Terms. — As used in this
Decree, the following terms are defined as follows:cralaw:red
A. "MINISTRY" shall mean the Ministry of Agriculture
and Food.
B. "BOARD" shall mean the Board of Investments.
C. "AGRICULTURE" shall cover the subsectors of crops,
tree farming, poultry and livestock, and fisheries.
D. "COMMITTEE" shall mean the Inter-Agency Committee.
E. "INDIGENOUS MATERIALS" shall mean raw materials
grown and/or produced in the Philippines.
F. "GENETIC MATERIALS" shall mean livestock breed,
crop varieties, and fishery species.
G. "FARMERS GROUPS" shall mean formal organizations
registered with the government.
H. "CROP ZONIFICATION" shall mean geographical
delineation of suitable area for the production of specific crops based
on the following criteria: soil and climate conditions; infrastructure
and support services; and local and external demands within specific
periods of time.
I. "RATE OF REFERENCE" shall mean the level or extent
of incentive accorded to a particular agricultural activity.
J. "STATUS OF PREFERENCE" shall mean the priority
category, i.e. First, Second or Third of a particular agricultural
activity.
K. "AGRICULTURAL PRODUCTION" shall mean raising,
growing and rearing of crops, livestock and fisheries for food, feed
and as raw materials.
L. "IDLE LANDS" shall mean lands suitable for
agricultural production but are uncultivated or not devoted to such
use.
M. "TAX CREDIT" shall mean any of the credits against
taxes and/or duties paid or would have been paid or based on a
percentage of gross sales extended to a registered agricultural
enterprise by this Decree to evidence which a tax credit certificate
shall be issued by the Board.
The tax credit certificate shall be negotiable with the following
creditors of the registered agricultural enterprises:cralaw:red
a. Fertilizer and chemical producers registered with
the Fertilizer and Pesticide Authority;chanroblesvirtualawlibrary
b. Seed producers registered with the National Food
and Agricultural Council; and
c. Board registered enterprises. chanroblesvirtualawlibrary
The tax credit certificate issued in favor of registered agricultural
enterprise under this Decree may be used or applied against any or all
tax liabilities to the National Government.
N. "REGISTERED AGRICULTURAL PRODUCER AND/OR
ENTERPRISE" shall mean any person or entity which has the
qualifications prescribed in Sec. 20 hereof and which registers with
the Board.
O. "MEASURED CAPACITY" shall mean the estimated
additional volume of production or service which the Board determines
to be desirable in each preferred area of investment in order to supply
the needs of the economy at reasonable prices.
P. "CONTRACT GROWING" shall mean a system by which
individuals, corporations, partnerships or other entities registered
under this Decree contract to grow their raw material requirements with
small farmers and provide financial, technical as well as other forms
of assistance.
CHAPTER III
ADMINISTRATION
Section 3. Administration. — Administration of this
Decree shall be vested in the Ministry of Agriculture and Food.
The fiscal incentives shall be administered by the Board of
Investments.
The preparation of the Agricultural Investment Priorities Plan shall be
the primary responsibility of the Inter-agency Committee which shall be
composed of the following: the representative of the Ministry of
Agriculture and Food, as Chairman, and the representatives of the
National Economic and Development Authority (NEDA), the National Food
Authority (NFA), the Philippine Council for Agriculture and Resources
Research and Development (PCARRD), the Ministry of Finance, the Central
Bank of the Philippines, the Ministry of Agrarian Reform (MAR), the
Ministry of Natural Resources (MNR), and two (2) representatives from
the Farmers' group which shall be chosen by the Ministry as members,
with the representative of the Ministry of Trade and Industry, as
Vice-Chairman.
CHAPTER IV
AGRICULTURAL INVESTMENT PRIORITIES PLAN
Section 4. Agricultural Investment Priorities Plan. —
Not later than the end of March of every year, the Inter-Agency
Committee shall prepare an Agricultural Investment Priorities Plan
which shall list the preferred areas of agricultural ventures deserving
of assistance and incentives taking into account their contributions to
the economy and their measured capacity. Such Plan shall be prepared in
correlation with established long range agricultural and other
development plans.
The Committee shall indicate in the Plan the priority of each
agricultural activity to determine the degree of assistance and
incentives to be given under this Decree.
Section 5. Criteria in Agricultural Investment
Priority Determination. — No agricultural activity shall be included in
the Agricultural Investment Priorities Plan unless it is shown to be
economically, technically, financially or socially viable after a
thorough analysis by the Committee. The Plan shall specify each type of
agricultural crop or activity as First Priority, Second Priority or
Third Priority, taking into account any or all of the following
criteria:cralaw:red
1. domestic requirement;chanroblesvirtualawlibrary
2. Worldwide demand for the product;chanroblesvirtualawlibrary
3. prevailing and projected world market prices;chanroblesvirtualawlibrary
4. technical suitability of the crop or activity to
Philippine agricultural conditions;chanroblesvirtualawlibrary
5. innovativeness of the agricultural crop/activity
or the technology employed in the production;chanroblesvirtualawlibrary
6. linkages with desirable business activities;chanroblesvirtualawlibrary
7. degree of risk involved;chanroblesvirtualawlibrary
8. import substitution;chanroblesvirtualawlibrary
9. employment generation; and
10. other criteria as may be determined by the
Committee, such as the crop zonification plan of the government for a
particular area.
Section 6. Amendments. — Except for the indicated
rate of preference and the duration of the status of preference, the
Committee may, after due notice and hearing, amend the whole or any
part of the Plan.
Section 7. Publication. — Upon approval of the Plan
or upon approval of an amendment thereof, the Plan or the amendment
specifying and declaring the preferred area of investment shall be
published in at least two (2) newspapers of national circulation and
broadcast nationwide through selected radio and television programs.
All such activities shall be open for application until the publication
of an amendment or deletion thereof.
CHAPTER V
PRICING AND MARKETING INCENTIVES
SUB-CHAPTER A.
PRICING INCENTIVES
Section 8. Pricing policy. — The primacy of market
forces in the determination of input and output prices for agricultural
products shall prevail: Provided, however, That in order to ensure
price and supply stability, the Ministry may recommend to the President
appropriate intervention measures if so warranted by conditions as may
exist from time to time.
SUB-CHAPTER B.
MARKETING INCENTIVES
Section 9. Establishment of Price and/or Market
Information System. — The Ministry shall establish an effective
nationwide price information system, with small farmers and farmers'
cooperatives as primary clientele, in order that producers may avail of
updated information on existing market prices of agricultural
commodities during a specified time period.
In like manner, the Ministry of Agriculture and Food, in coordination
with the Ministry of Trade and Industry shall also set up a nationwide
information system to ensure an even flow of agricultural produce and
also identify non-traditional markets, both domestic and foreign, for
the benefit of small farmers' cooperatives.
Section 10. Establishment of Trading Post and/or
Centers in Major Agricultural Producing Areas. — Government shall
encourage the establishment of trading posts and/or centers and
processing plants by cooperatives in major agricultural production
areas to minimize losses due to spoilage and avoid or prevent rush
sales that usually lead to unprofitable farm prices.
CHAPTER VI
CREDIT AND INSURANCE INCENTIVES
Section 11. Preferential Credit Facilities. — The
Central Bank in the performance of its rediscounting function is
required to use the Agricultural Investment Priorities Plan as basis
for their credit allocation policies. The Central Bank shall ensure
that credit allocations for agriculture and agriculture related
activities shall be strictly complied with and no alternative
investments in compliance with said requirement shall be allowed as
provided for in P.D. 717.
Section 12. Preferential Interest Rates. — In setting
interest rates, the Central Bank is required to use the Agricultural
Investment Priorities Plan as the basis for any preferential interest
rate structure.
Section 13. Priority in Project Financing. —
Government financing institutions shall give priority in project
financing to agricultural producers in accordance with thePP.
Section 14. Agricultural Insurance. — To minimize the
risk of producers, the Government shall study the possibility of
expanding crop insurance coverage to other types of agricultural
commodities in addition to rice and corn which, if found feasible,
shall be implemented on a voluntary basis. Meanwhile, the Government
shall assist the Philippine Crop Insurance Corporation (PCIC), whenever
necessary, in the effective implementation of its insurance program for
rice and corn.
CHAPTER VII
TECHNOLOGY INCENTIVES
Section 15. Continued Research and Technology
Development. — With the current need to improve agricultural
productivity, the Ministry shall intensively pursue research
activities, and endeavor to develop new technologies which would
economize the use of basic resources (land, labor and capital). The
Ministry shall encourage the private sector to engage in similar
activities by way of giving preferential accreditation in government
programs.
Section 16. Extension of Preferential Technical
Assistance in the Development of Agriculture Commodities Identified in
the Agricultural Investment Priorities Plan. — The Ministry of
Agriculture and Food shall ensure the inclusion of the preferred
commodities in the areas to be covered by technical cooperation and
external assistance programs for agriculture.
CHAPTER VIII
INFRASTRUCTURE DEVELOPMENT INCENTIVES
Section 17. Infrastructure Program for Agriculture. —
The Ministry of Agriculture and Food, in coordination with the Ministry
of Public Works and Highways (MPWH) and the National Irrigation
Administration (NIA) shall formulate an annual program for agriculture
which shall identify the priority infrastructure activities for each
region. Such annual infrastructure program shall be supportive of the
priority activities included in the annual Agricultural Investment
Priorities Plan. chanroblesvirtualawlibrary
Section 18. Acceleration of Land Titling and Land
Classification Services. — The Ministry of Agriculture and Food and the
Ministry of Natural Resources shall direct their respective agencies to
give priority to agricultural lands in conducting land classification,
land surveys and land titling. Investors may employ the services of
private firms in conducting land classification and land surveys for
agricultural purposes. Actual and reasonable expenses incurred thereof
shall be deductible from the investors' gross taxable income for the
same year.
Section 19. Acceleration and intensification of Land
Development. — The Ministry shall provide technical assistance to land
owners who shall engage in the development of their idle lands for
agricultural purposes.
CHAPTER IX
FISCAL INCENTIVES
SUB-CHAPTER A.
QUALIFICATIONS FOR REGISTRATION
Section 20. Qualifications for Availment of Fiscal
Incentives. — To qualify for registration as an agricultural producer
and/or enterprise entitled to avail of fiscal incentives, the applicant
must (a) be engaged or proposes to engage in agricultural production,
processing and marketing if substantially integrated with agricultural
production, and/or other related services or facilities necessary to
support agricultural production including transport, handling and
storage of products and by-products arising out of such production,
declared specifically as a preferred area of investment; and (b) be a
citizen of the Philippines, in case the applicant is a natural person
or in case of a partnership, corporation or any association, it is
organized under Philippine laws and that at least sixty percent (60%)
of its capital is owned and controlled by citizens of the Philippines,
and that at least sixty percent (60%) of the members of the Board of
Directors are citizens of the Philippines: Provided, That, subject to
the provisions of the Constitution on the nationality requirement where
exploitation of natural resources is involved, and other applicable
nationalization laws, the above nationality requirement shall not apply
to agricultural ventures classified as First and Second Priority in the
Plan.
Agricultural producers who engage in intermediate and final processing
of agricultural products not otherwise covered by the Investment
Priorities Plan of the Board under existing laws may register such
manufacturing activities under this Decree if such activities are
likewise covered by the Agricultural Investment Priorities Plan.
Small scale farmers engaged in contract growing of agricultural
products used as inputs for registered activities may register as
agricultural producers if such commodity is listed in the Plan, subject
to the guidelines that will be promulgated by the Board in consultation
with the Bureau of Internal Revenue: Provided, There is no double
availment of comparable incentives for the same product.
Filipino citizens and corporations or associations may enter into
service contract for financial, technical, management or other forms of
assistance with any foreign person or entity for the development of
Philippine agriculture, agricultural resources and food production.
SUB-CHAPTER B.
FISCAL INCENTIVES TO INVESTORS
Section 21. Tax Deductions for Investors in
Agricultural Enterprises. — During the first seven (7) years from date
of registration, an investor in a new or expanding registered
enterprise engaged in agricultural production and/or services shall be
allowed to deduct from his net taxable income an amount equal to his
actual investment paid in, but not exceeding thirty percent (30%) of
net taxable income for those engaged in agricultural activities in the
Agricultural Investment Priorities Plan listed as First Priority;
twenty-five percent (25%) of net taxable income for those listed as
Second Priority; and twenty percent (20%) for those listed as Third
Priority: Provided, That if the investments are transferred or redeemed
upon request of the investors within three (3) years from date of
acquisition, the investor shall lose the benefit of this deduction and
shall pay the readjusted income tax within thirty (30) days from date
of transfer or redemption. chanroblesvirtualawlibrary
The tax deductions herein granted may be availed of by both fixed and
variable income earners notwithstanding any provision of law to the
contrary.
Section 22. Tax Deductions for Reinvestment. — An
existing firm which will engage in either new or expansion of an
agricultural project shall be entitled to the tax deductions provided
in the preceding section under the same limitations provided therein.
SUB-CHAPTER C.
FISCAL INCENTIVES TO REGISTERED AGRICULTURAL ENTERPRISES
Section 23. Tax Credit on Gross Sales. — For a period
of five (5) years from date of commercial operation, a registered
agricultural enterprise shall be entitled to a tax credit equivalent to
five percent (5%) of gross sales for agricultural activities listed in
the Agricultural Investment Priorities Plan as First Priority; three
and one-half percent (3.5%) of gross sales for those listed as Second
Priority and two percent (2%) for those listed as Third priority. In
case of farmers' cooperatives, and corporations engaged in contract
growing with small farmers the tax credit may be increased by an
additional one percent (1%). With respect to existing enterprises they
may avail of this incentive for a period of five years from date of
registration under this law but only to the extent of their incremental
output.
Section 24. Net Operating Loss Carry Over. — A net
operating loss, inclusive of financial charges, of the registered
agricultural activity incurred in any of the first ten (10) years of
operations may be carried over as a deduction from taxable income of
the enterprise for the six (6) years immediately following the year of
such loss. The entire amount of the loss shall be carried over to the
first of the six (6) taxable years following the loss, and any portion
of such loss which exceeds the taxable income for such first year shall
be deducted in like manner from the taxable income of the net remaining
five (5) years.
Section 25. Tax Exemption on Imported Capital
Equipment. — Within five (5) years from date of registration of the
enterprise, importations of machinery and equipment and accompanying
spare parts shall be exempt to the extent of one hundred percent (100%)
of the tariff duties and compensating taxes payable thereon: Provided,
That said machinery, equipment and spare parts are (1) not manufactured
domestically in sufficient quantity, of comparable quality and at
reasonable prices; (2) reasonably needed in the registered activity;
and (3) approved by the Board.
Section 26. Tax Credit on Domestic Capital Equipment.
— A tax credit equivalent to the value of the compensating 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
registered agricultural enterprise which purchases machinery, equipment
and spare parts from a domestic manufacturer subject to the conditions
mentioned in Sec. 25 hereof.
Section 27. Tax Exemption on Breeding Stocks and
Genetic Materials. — The importation of breeding stocks and genetic
materials within five (5) years from date of registration or commercial
operation to 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 not obtainable locally in comparable quality
and at reasonable prices; (2) reasonably needed in the registered
activity; and (3) approved by the Board. chanroblesvirtualawlibrary
Section 28. Exemption from Contractors' Tax. — Small
and medium scale farmers engaged in contract growing duly registered
with the Board shall be exempt from the payment of contractors' tax on
gross receipts of their agricultural products delivered to
manufacturing enterprises.
Section 29. Tax Credit for Taxes and Duties on Raw
Materials. — Every registered agricultural producer shall enjoy a tax
credit equivalent to the sales, compensating and specific taxes and
duties paid on the supplies, raw materials and semi-manufactured
products used in the production of its exported agricultural products
and forming part thereof, exported directly by the registered
agricultural producer or sold to an export trader who subsequently
exports said product: Provided, however, that where the cost of certain
supplies and raw materials constitutes at least forty percent (40%) of
the cost of production of the registered exported agricultural product,
tax credit on sales, specific taxes and duties paid thereon may also be
granted even if they do not form part of the registered exported
agricultural product: and Provided, further, That the taxes on
supplies, raw materials and semi-manufactured products domestically
purchased are indicated as a separate item in the sales invoice.
CHAPTER X
OTHER INCENTIVES
Section 30. Employment of Foreign Nationals. —
Subject to the provisions of Section 29 of Commonwealth Act No. 613, as
amended, an agricultural producer 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 Ministry or Board.
Section 31. Procedures for Agricultural Enterprises.
— The Board shall establish a simplified system of registration for
agricultural enterprises in order to facilitate access by such
enterprises to incentives herein provided.
CHAPTER XI
GENERAL PROVISIONS
Section 32. Rules and Regulations. — The Ministry
shall promulgate rules and regulations to implement the intent and
provisions of this Decree. However, the Board shall promulgate its
rules and regulations on the registration and availment of Board
incentives of agricultural producers or enterprises registered with it.
Such rules and regulations shall take effect fifteen (15) days
following its publication in the Official Gazette and/or newspaper of
general circulation. chanroblesvirtualawlibrary
Section 33. Benefits of Multiple Area Enterprises. —
When a registered enterprise is engaged in activities or endeavors that
have not been declared preferred areas of investment, the benefits and
incentives accruing under this Decree to registered enterprises and
investors therein shall be limited to the portion of the incentives of
such registered enterprises as is a preferred area of investment.
Section 34. Extension of the Period of Availment of
Incentives. — The Board may extend the period of availment of fiscal
incentives by any registered enterprise by a period to be determined by
the Board, subject to any of the following criteria:cralaw:red
a. The registered enterprise has suffered heavy
financial losses and is in a distressed condition;chanroblesvirtualawlibrary
b. The registered enterprise has suffered operational
damage due to force majeure that has impaired its viability;chanroblesvirtualawlibrary
c. The registered enterprise has not fully enjoyed
the incentives granted to it for reasons beyond its control;chanroblesvirtualawlibrary
d. The project of the registered enterprise has a
gestation period which goes beyond the period of availment of needed
incentives; and
e. The operations of the registered enterprise has
been subjected to unforeseen changes in government policies,
particularly, protectionism policies of importing countries, and such
other supervening factors which would affect the competitiveness of the
registered firm.
Section 35. Cancellation of Registration. — After due
notice and hearing, the Board may cancel the registration or suspend
the enjoyment of incentives benefits of any registered agricultural
producer and/or enterprise and/or require refund of incentives enjoyed
by such producer or enterprise including interests and penalties, for
(a) failure to maintain the qualifications required by this Decree for
registration or (b) for violation of any provisions of this Decree, of
the rules and regulations issued under this Decree, or of the terms and
conditions of registration. chanroblesvirtualawlibrary
Section 36. Appropriations. — Appropriations
necessary to carry out the purposes of this Decree shall come from the
existing funds of the Ministry and/or Board.
Section 37. Separability Clause. — The provisions of
this Decree are hereby declared to be separable and in the event any of
such provisions or parts thereof is declared unconstitutional, the
other provisions or parts thereof shall remain in full force and
effect.
Section 38. Repealing Clause. — The provisions of
Article 47 of the Omnibus Investments Code and Section 13 of Batas
Pambansa Blg. 391 are hereby repealed. All laws, decrees, executive
orders, administrative orders, rules and regulations or parts thereof
which are inconsistent with the provisions of this Decree are hereby
repealed, amended or modified accordingly.
Section 39. Transitory Provisions. — Enterprises
registered under Presidential Decree Nos. 1159 and 1789 shall continue
to enjoy the incentives under the laws of their registration for the
period specified therein without any extensions: Provided, That said
enterprises, if qualified hereunder, may waive such incentives and opt
to be governed by the provisions of this Decree.
Section 40. Effectivity Clause. — This Decree shall
take effect immediately upon approval.
Done in the City of Manila,
this 4th day of February, in the year of Our Lord, nineteen hundred and
eighty-six.
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