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PRESIDENTIAL DECREE NO. 535
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PRESIDENTIAL DECREE NO. 535 -
PROVIDING FOR A COMPREHENSIVE INVESTMENT INCENTIVES PROGRAM FOR THE
TOURISM INDUSTRY
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chanroblesvirtualawlibrary
WHEREAS,
there is need to encourage and hasten the establishment of hotel
and other tourist oriented facilities necessary to meet the
requirements of the tourist traffic;chanroblesvirtualawlibrary
WHEREAS, there is need to align incentives and requirements of Tourism
Projects in line with the specific needs of the tourism industry;chanroblesvirtualawlibrary
WHEREAS, it is realized that foreign investment and financing is
required to meet the financial requirements of the said industry; chanroblesvirtualawlibrary
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 as follows:cralaw:red
Section 1. Title. — This Decree shall be known and
cited as the "Tourism Incentives Program of 1974."
Section 2. Declaration of Policy. — It is the policy
of the State to encourage and promote tourism in the
Philippines, particularly, in providing services to foreign
tourists and travellers, in order to increase foreign exchange
earnings and to hasten the economic development of the nation.
Section 3. Definition of Terms. — For purposes of
this Decree:cralaw:red
(a) "Philippine Tourism Authority" or simply
Authority" shall mean the Philippine Tourism Authority as defined
in its charter, Presidential Decree 189.
(b) "Registered Tourism Enterprise" shall mean
a person, corporation partnership or other entity organized
and existing under the Philippine Constitution registered with
the Authority in accordance with this Decree and engaged in or
proposing to engage in rendering services to foreign tourists and
travellers covered by the Tourism Priorities Plan and subject to the
guidelines prepared by the Department of Tourism.
Section 4. Tourism Priorities Plan. — Not later than
the end of January of every year the Department of Tourism shall submit
to the President through the National Economic and Development
Authority a Tourism Priorities Plan setting forth the tourism
activities to be encouraged and given priority and the tourism
facilities required to supply the needs of foreign tourists and
travellers. Incentives shall be made available to these
projects. chanroblesvirtualawlibrary
Section 5. Incentives for Investors. — In addition to
the incentives provided under this Decree, investors in registered
tourism enterprises or projects shall enjoy the basic rights and
guarantees set forth in Section 4 of Republic Act No. 5186,
otherwise known as the Investment Incentives Act.
Section 6. Conditions for Availment of Tourism
Incentives. —chanroblesvirtualawlibrary
(a) No registered tourism enterprise shall be
entitled to any incentive under this Decree until its registration
shall have been approved by the Authority, which approval shall
retroact to the date of filing of the application for registration.
(b) To be entitled to registration, an applicant must
satisfy the Authority —chanroblesvirtualawlibrary
(1) that in case the applicant is a natural
person, that he is a citizen of the Philippines; and in case
the applicant is a partnership or other association, that it
is organized under Philippine laws and that at least 60% of
its capital is owned and controlled by citizens of the Philippines; or
in case of a corporation or a cooperative, that it is organized
under Philippine laws and that 60% of the capital stock
outstanding and entitled to vote is owned and held by Philippine
nationals as defined in Section 3 (f) of Republic Act No. 5186, and at
least 60% of the members of the Board of Directors are citizens of the
Philippines;chanroblesvirtualawlibrary
(2) that applicant before engaging in any of the
activities reserved by the Constitution or statutes to Filipino
citizens or corporations owned and controlled by Filipino citizens
applicant shall first comply with the requirements of the
Constitution or statutes; and
(3) that if the applicant will engage in an activity
other than that for which it is registered, it undertakes to install an
adequate accounting system to segregate the investments,
revenues, sales receipts, purchases, payrolls, costs, expenses and
profits and losses of the registered operations.
(c) In the case of registered tourism enterprises
located in or whose sphere of activity is in Greater Manila, an average
of seventy percent (70%) of its revenues must be in foreign currency,
never falling below fifty percent (50%) in any given year within the
period for which the incentives are granted and in the case of
registered tourism enterprises located outside Greater Manila, or whose
sphere of activity is outside the same, an average of fifty percent
(50%) of revenues shall be in foreign currency, never falling
below thirty-five percent (35%) in any given year within the period for
which incentives are granted.
(d) Upon receipt of the application for registration,
the Authority shall, within thirty (30) days, notify the
applicant of all pertinent requirements not complied with and it
shall act on said application within sixty (60) days after
submission thereof.
Section 7. Joint Registration. — In cases where the
hotel owners are not the hotel operators, both shall be allowed
to register on a joint basis: Provided, That the hotel operators
do not merely lease the hotel building or facilities from the owners;
and Provided, further, That the granting of incentives will not
result in additional benefits to both or to one if treated as a single
registered tourism enterprise.
Section 8. Incentives Available to a Registered
Tourism Enterprise. —chanroblesvirtualawlibrary
(a) Fifty percent (50%) of foreign exchange earned in
the first five years from the start of operations shall be
deductible from net taxable income, subject to other provisions
of Section 10 of Republic Act No. 6135 and rules and regulations
to be promulgated by the Authority.
(b) A net operating loss incurred in any of the first
ten years of operation shall be carried over as a deduction from
taxable income for six years following such loss as provided for
in Section 7 (c) of Republic Act No. 5186.
(c) A tax credit shall be granted for taxes withheld
on interest payments on foreign loans as provided for in
Section 7(f) of Republic Act No. 5186 and defined under Section 3
thereof.
(d) Exemptions from real estate taxes on land
improvements and buildings shall be granted for the first five
years from the start of operations.
(e) Importations of machinery and equipment, and
spare parts shipped with such equipment shall not be subject to
tariff duties and compensating tax within seven years from the
date of registration with the Authority subject to the
other provisions in Section 7(d) of Republic Act No. 5186. chanroblesvirtualawlibrary
(f) A tax credit equivalent to one hundred percent of
the value of the compensating tax and customs duties that
would have been paid on machinery and spare parts had these
items been imported shall be given to the registered
tourism enterprise who purchases machinery, equipments and
spare parts from a domestic manufacturer, and another tax
credit equivalent to fifty percent thereof shall be given to the
said manufacturer subject to other provisions in Sections 7(e)
of Republic Act No. 5186, and defined under Section 3(j) thereof.
(g) Undistributed profit or surplus which a
registered tourism enterprise reinvests shall be allowed as a
deduction from its taxable income in the year such reinvestments
were made, subject to other provisions of section 7(h) of
Republic Act No. 5186, to the extent of:cralaw:red
(i) 50% for expansion of registered tourism
facilities within the Greater Manila Area;chanroblesvirtualawlibrary
(ii) 75% for expansion of registered tourism
facilities outside of Greater Manila;chanroblesvirtualawlibrary
(iii) 75% for the expansion of existing registered
tourism facilities in Greater Manila to additional facilities outside
of Greater Manila.
Section 9. Incentives to Philippine Nationals
Investing in Registered Tourism Enterprises Qualified Herein. —chanroblesvirtualawlibrary
(a) An investment allowance shall be permitted as a
deduction from the investor's taxable income to the extent of his
actual investment but not to exceed ten percent thereof as provided for
in Section 6(a) of Republic Act No. 5186. chanroblesvirtualawlibrary
(b) Exemption from income tax on the portion of the
gains realized from the sale, dispositions, or transfer of
capital assets equal to the portion of the sales proceeds that is
invested in new issues of stock of, or in the purchase of stock owned
by foreigners, in registered tourism enterprises, within six months
from the date the gains were realized, subject to the other
provisions of Section 6(b) of Republic Act No. 5186.
Section 10. Incentives to Foreign National Investing
in Registered Tourism Enterprises Qualified Herein. —
Exemption from withholding tax on dividends remitted abroad to
foreign investors shall be granted.
Section 11. Other Incentives. — Provisions in Section
10, 11, and 12 of Republic Act No. 5186 shall also be applicable
to firms registered under this Decree.
Section 12. Suspension or Cancellation of Incentives.
— The incentives provided for in this Decree may be suspended
or cancelled in accordance with Section 13 of Republic Act No.
6135.
Section 13. Tourism Enterprises Registered
Under Republic Act No. 6135. — Any enterprise registered
under Republic Act No. 6135 at the time of the promulgation of
this Decree shall continue to be governed by provisions of said
Act and shall be considered automatically registered under the
provisions of this Decree: Provided, That the incentives available
under Section 8 (b), 8 (e) and 8 (f) herein shall only be applicable
and shall be given prospective effect from the date of its registration
under this Decree: Provided, further, That enterprises registered under
Republic Act No. 6135 not yet in operation upon the promulgation of
this Decree may avail of all incentives granted herein by subsequent
registration under the provisions of this Decree: Provided,
furthermore, That all other incentives herein shall only be
applicable to expansion of registered capacity. chanroblesvirtualawlibrary
Section 14. Applicability to Existing Tourism
Enterprises. — An enterprise which satisfies the requirements for
registration specified herein, which at the time of promulgation of
this Decree has not been registered under Republic Act No. 6135,
shall be entitled to registration under this Decree as to its existing
capacity. Similarly, an investor in such an existing enterprise shall
be entitled to benefits and incentives to the extent of his present
investment: Provided, That the application is filed while the area is
still in the Tourism Priorities Plan: Provided, further, That the
application is filed while the area is still in the Tourism
Priorities Plan: Provided, further, That the benefits of this
Decree, so far as may be applicable to such existing enterprises,
shall be given prospective effect only from the date of registration:
Provided, furthermore, That the incentives applicable shall only
be those covered by Section 8(a), for a period of 5 years after
registration, Section 8(b), 8(e) and 8(f) and, in the case of expansion
of existing capacity, all other incentives shall be applicable only
with respect to the expanded capacity.
Section 15. Certification of Registration. — All
tourism enterprises registered under this Decree shall be
issued a certificate of registration under the seal of the
Philippine Tourism Authority and the signature of its Chairman
and/or such other officer or employee of the Authority as it may
empower and designate for the purpose. The certificate shall be in such
form and style as the Authority may determine and shall state, among
other things:cralaw:red
(a) The name of registered tourism enterprises;chanroblesvirtualawlibrary
(b) The preferred area of investment in which the
registered tourism enterprise is proposing to engage;chanroblesvirtualawlibrary
(c) The nature of the activity it is undertaking or
proposing to undertake and the registered capacity of the
enterprise; and
(d) The other terms and conditions to be observes by
the registered tourism enterprise by virtue of the registration. chanroblesvirtualawlibrary
Section 16. Implementing Agency. — The
Philippine Tourism Authority shall issue rules and regulations as
may be necessary for the proper implementation of the provisions
of this Decree within 60 days after its approval. Such rules and
regulations shall be effective 30 days after their publication in two
(2) newspapers of general circulation in the Philippines.
Section 17. Penal Provisions. — The penalties shall
be as those provided for in Section 19 of Republic Act No.
6135. chanroblesvirtualawlibrary
Section 18. Repealing Clause. — All laws, decrees,
orders, rules and regulations or provisions thereof inconsistent
with this Decree are hereby modified or repealed accordingly.
Section 19. Effectivity. — This Decree shall take
effect immediately.
Done in the City of Manila,
this 9th day of August, in the year of Our Lord, nineteen hundred and
seventy-four.
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