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PRESIDENTIAL DECREE NO. 485
PRESIDENTIAL DECREE NO. 485 -
AMENDING CERTAIN SectionS OF REPUBLIC ACT NUMBERED FIFTY-ONE HUNDRED
EIGHTY-SIX AS AMENDED, OTHERWISE KNOWN AS THE INVESTMENT INCENTIVES
ACT, AND REPUBLIC ACT NUMBERED SIXTY-ONE HUNDRED THIRTY-FIVE AS
AMENDED, OTHERWISE KNOWN AS THE EXPORT INCENTIVES ACT
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chanroblesvirtualawlibrary
WHEREAS, to
further ensure the sound development of the national economy, it is
imperative that certain provisions of R.A. No. 5186 ("Investment
Incentives Act") and R.A. No. 6135 ("Export Incentives Act") be amended;chanroblesvirtualawlibrary
WHEREAS, there are certain sectors of the industry, i.e., those engaged
essentially in rendering services, such as public utilities, the growth
of which is likewise indispensable to the sound development of the
national economy;chanroblesvirtualawlibrary
WHEREAS, under the present provisions of the Investment Incentives Act,
service industries are not eligible for registration thereunder;chanroblesvirtualawlibrary
WHEREAS, to encourage and hasten the establishment of facilities that
are necessary for a balanced growth of the economy and the effective
regional dispersal of industries, certain services to be listed in a
Utilities Priorities Plan should be eligible for incentives upon
registration with the Board of Investments; chanroblesvirtualawlibrary
WHEREAS, there is a further need to align the incentives and
requirements of the Export Incentives Act with the Investment
Incentives Act;chanroblesvirtualawlibrary
NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Philippines,
by virtue of the powers in me vested by the Constitution, do hereby
order and decree amendments to Republic Act Numbered Fifty-One Hundred
Eighty-Six, as amended, otherwise known as the Investment Incentives
Act and Republic Act Numbered Sixty-One Hundred Thirty-Five, as
amended, otherwise known as the Export Incentives Act, as
follows: chanroblesvirtualawlibrary
Section 1. Subsections (b), (i), and (j) of Section 3
of Republic Act Numbered Fifty-One Hundred Eighty-Six are hereby
amended to read as follows:cralaw:red
"Sec. 3. .
(b) "Registered Enterprise" shall mean a corporation
(1) incorporated, organized and existing under Philippine laws, (2) of
which, except as provided in Section nineteen of this Act, at least
sixty per cent (60%) of the capital stock outstanding and entitled to
vote is owned and held by Philippine Nationals, and at least sixty per
cent (60%) of the members of the Board of Directors are citizens of the
Philippines, (3) engaged in a preferred area of investment, and (4)
duly registered with the Board of Investments; Provided, however, That
the term registered enterprise shall not include commercial banks,
savings and mortgage banks, rural banks, savings and loan associations,
building and loaned associations, development banks, trust companies
investment banks, finance companies, brokers and dealers in securities,
consumers cooperatives and credit unions, and other business
organizations whose principal purpose or principal source of income to
receive deposits, lend or borrow money, buy and sell or otherwise deal,
trade or invest in common or preferred stocks, debentures, bond or
other marketable instruments generally reorganized as securities, or
discharge other similar intermediary, trust or fiduciary functions;
neither shall the term include business organization whose exclusive or
principal purpose is to buy goods and merchandise and resell the same
in substantially the same form in which bought.
(1) "Measured Capacity" shall mean the estimated
additional volume of production or service which the Board determines
to be desirable in each preferred and pioneer area of investment, in
order to supply the needs of the economy at reasonable prices, taking
into account the export potential of the area. Measured capacity shall
not be less than the amount by which the measurable market demand
exceeds the existing productive capacity in said preferred and pioneer
areas nor shall measured capacity be so much in excess of measurable
market demand as to foster or encourage overcrowding in any such area.
For export market industries, the Board shall base measured capacity on
the availability of domestic raw materials after deducting the needs of
the domestic market therefor. In no case, however, shall measured
capacity be construed so as to result in a monopoly in any preferred or
pioneer area of investment which would unduly restrict trade and fair
competition.
(j) "Tax Credit" shall mean any of the credits
against taxes and/or duties extended to a registered enterprise by this
Act, to evidence with a tax credit certificate shall be issued by the
Secretary of Finance. Unless otherwise provided herein, the tax credit
certificate may be used by the registered enterprise to pay taxes,
duties, charges and fees due to the national government in connection
with its registered operations. A tax credit certificate shall be
non-transferable; it may be used by the registered enterprise only for
as long as it enjoys the benefits and incentives provided for in this
Act, but may not be used so as to result, in effect, in a refund."
Section 2. Section 3 of the same Act is hereby
further amended by adding a new subsection (1) which reads as follows:cralaw:red
"(1) "Public Utilization Priorities Plan" shall mean
the plan prepared by the Board in consultation with the Board of
Transportation, Board of Power, Power Development Council, and other
appropriate government agencies. Such plan shall be approved by the
President upon recommendation of the National Economic and Development
Authority (NEDA), which shall contain a listing of specific public
utilities which can qualify for incentives under this Act, and which
shall be supported by studies of existing and prospective regional
demands for such services in the light of the level and structure of
income, production, trade, prices and relevant economic and technical
factors of the regions as well as the existing facilities to produce
such services."
Section 3. Subsection (d) of Section 7 of the same
Act is hereby amended to read as follows:cralaw:red
"(d) Tax exemption on Imported Capital Equipment. —
Within seven (7) years from the date of registration of the enterprise,
importations of machinery and equipment and spare parts shipped with
such machinery and equipment shall not be subject to tariff duties and
compensating tax: Provided, That said machinery, equipment and spare
parts: (1) are not manufactured domestically in reasonable quantity and
quality at reasonable prices; (2) are directly and actually needed and
will be used exclusively by the registered enterprise in the
manufacture of its products, unless prior approval of the Board is
secured for the part-time utilization of said equipment in
non-registered operations to maximize usage thereof, or the
proportionate taxes and duties are paid on the specific equipment and
machinery being permanently used for non-registered operations; (3) are
covered by shipping documents in the name of the registered enterprise
to whom the shipment will be delivered direct by customs authorities;
and (4) the prior approval of the Board was obtained by the registered
enterprise before the importation of such machinery, equipment and
spare parts. For enterprises approved for registration by the Board
after the effective date of this decree, which are engaged in new
preferred non-pioneer activities, with total assets or projected total
assets of five hundred thousand pesos (P500,000.00) or more of the
first two years of commercial operations, the Board subject to the
criteria to be formulated in consultation with the Secretary of
Finance, and to the above enumerated conditions, shall in lieu of an
exemption reduce partially the tariff duties and compensating tax on
such machinery, equipment, and spare parts, and defer the payment of
such reduced taxes and duties for a period not exceeding ten (10)
years, after posting the appropriate bond as may be required by the
Secretary of Finance. For replacement or modernization of existing
facilities of pioneer and non-pioneer registered enterprises, or for
expansion of projects with 20% or greater return on equity, mere
deferment in payment of taxes and duties as above provided shall be
allowed without reduction thereof. In granting approval of importations
under this paragraph, the Board shall require international bidding to
be conducted by the end-user in Manila under its supervision; however,
the Board may, in its discretion, dispense with the requirement if (1)
there is, to the knowledge of the Board, only one manufacturer of the
machinery, equipment and spare parts to be imported or (2) the
importation is caused by the expansion of the registered enterprises
and such imports shall be acquired from the same manufacturer who
supplied the machinery, equipment, and spare parts being used by the
registered enterprise or (3) the total cost of importation is less than
one million dollars ($1,000,000.00) or (4) the Board has other means of
determining the reasonableness of the procurement cost. If the
registered enterprise sells, transfers or disposes these machinery,
equipment and spare parts without the prior approval of the Board
within five (5) years from the date of acquisition, the registered
enterprise shall pay twice the amount of the tax exemption given it.
However, the Board shall allow and approve the sale, transfer, or
disposition of the said items within the said period of five (5) years
if made: (1) to another registered enterprise; (2) for reasons of
proven technical obsolescence; or (3) for purposes of replacement to
improve and/or expand the operations of the enterprise. In such cases,
the transferee shall not be subject to the taxes and duties on the said
equipment other than the deferred taxes, if any, if it will undertake
an economic project substantially carrying out the objective for which
such equipment has been imported, as determined by the Board."
Section 4. Section 9(b) of the same Act is hereby
amended to read as follows:cralaw:red
"(b) Reduced Income Tax — Registered enterprises
shall be entitled for the first five (5) years from its registration,
to deduct from its taxable income an amount equivalent to the sum of
the direct labor cost and local raw materials utilized in the
manufacture of its completely finished export products: Provided,
however, That such deduction shall in no case exceed twenty-five per
centum (25%) of its total export revenue: Provided, further; That in
case of traditional exports, the local raw material component shall not
be included in computing the above deduction."
Section 5. The second paragraph of Section 10 of the
same Act is hereby amended to read as follows:cralaw:red
"The above-mentioned financial institutions, to the extent allowed by
their respective charters or applicable laws, shall contribute to the
capital of a registered enterprise whenever the said contribution would
enable the formation of a pioneer or other registered enterprise with
at least sixty per cent (60%) control by Philippine Nationals:
Provided, That the shares representing the contribution of the said
financial institutions shall be offered for public sale to the
Philippine Nationals through all the members of a registered Philippine
stock exchange within a reasonable period after such acquisition."
Section 6. Section 16 of the same Act is hereby
further amended by adding a new subsection (p) to read as follows:cralaw:red
"(p) Withdraw or cancel partially or totally, the
incentives granted to a registered enterprise under Republic Act
Numbered Fifty-One Hundred Eighty-Six or Republic Act Numbered
Sixty-One Hundred Thirty-Five when the registered enterprise has a
paid-up capital of at least five hundred thousand pesos (P500,000.00)
and earns for at least two (2) years profits from the registered
operations in excess of thirty-three and one- third per cent (33-1/3%)
of equity even without incentives under said laws."
Section 7. The first and fourth paragraph of Section
18 of the same Act is hereby amended to read as follows:cralaw:red
"Sec. 18. Preferred and Pioneer Areas of Investment.
— The Board of Investments shall submit to the President, not later
than the end of January of every year, through the National Economic
and Development Authority, an Investment Priorities Plan and Public
Utilities Priorities Plan, as defined in Section 3(k) and (l) of this
Act.
Considering the amount of investment capital which the Board may
estimate to be available during any given year, the Board shall give
priority to projects with the highest rates of return to the national
economy. No project shall be included in the Investment Priorities Plan
or Public Utilities Priorities Plan, nor declared a preferred area of
investment, nor designated a pioneer area, unless it is shown to be
economically, technically and financially sound after thorough
investigation and analysis by the Board. In any of the areas declared
preferred areas of investment, the Board may designate as pioneer areas
the specific products, commodities and services that meet the
requirements of Section three, paragraph (h) of this Act."
Section 8. Section 23 of the same Act is hereby
amended by deleting the first paragraph thereof to read as
follows: chanroblesvirtualawlibrary
"Sec. 23. Other Incentives Acts. — A registered
enterprise under this Act which is entitled to benefits under other
laws shall be entitled, to the extent of its registered capacity, to
such benefits granted under this Act as are not granted by said other
laws and to such benefits granted under the latter as are not granted
under the former."
Section 9. Subsection (b) of Section 6 of Republic
Act Numbered Sixty-One Hundred Thirty-Five is hereby amended to read as
follows:cralaw:red
"(b) To be entitled to registration, an applicant
must satisfy the Board that (1) he is a citizen of the Philippines in
case the applicant is a natural person, or in case of a partnership or
any other association, it is organized under Philippine laws and that
at least sixty per cent (60%) of its capital is owned and controlled by
citizens of the Philippines; or in case of a corporation or a
cooperative, it is organized under Philippine laws and that at least
sixty per cent (60%) of the capital stock outstanding and entitled to
vote is owned and held by Philippine Nationals as define under Section
3(f) of R.A. 5186, and at least sixty per cent (60%) of the members of
the Board of Directors are citizens of the Philippines; (2) that it is
engaged or proposes to engage in manufacturing, processing or exporting
export products listed in the export priorities plan or tourism
priorities plan, or if not so listed in the export priorities plan,
that at least fifty per cent (50%) of its sales are exports sales; or
in case of a service exporter, that it is engaged or proposes to engage
in rendering services payable in foreign currency, providing services
to foreign tourists and foreign travelers in areas within the Tourism
Priorities Plan and subject to the guidelines prepared by the
Philippine Tourist Commission and the Board, or in exporting television
or motion pictures, or musical recordings produced or made in the
Philippines; (3) that it is not engaged and will not engage in any of
the activities reserved by the Constitution or the laws of the
Philippines to Filipino citizens or corporations owned and controlled
by Filipino citizens unless and until the applicant can fulfill the
requirements of the Constitution or said laws; and (4) that if the
applicant is engaged or proposes to engage in activities other than the
manufacture, processing and exportation of export products, or in
rendering services other than export services, it has installed or
undertakes to install an adequate accounting system to segregate the
investments, revenues, sales, receipts, purchases, payrolls, costs,
expenses, and profits and losses of its export operations from those of
its domestic operations: Provided, That in the case of: (i) a pioneer
enterprise herein registered, as defined under Section 3(h) of Republic
Act Numbered Fifty-One Hundred Eighty-Six, (ii) a service exporter
primarily engaged in the business of catering to foreign tourists and
foreign travelers, and (iii) an export producer seventy per cent (70%)
of whose total production is to be exported, the nationality
requirement shall be in accordance with Section Nineteen of the said
Act instead of Section Six, paragraph (b) of this Act: Provided,
further, That in the latter case, the Board may increase the seventy
per cent (70%) export requirement in the event of an adverse effect on
the domestic producers of the export product: Provided, furthermore,
That upon receipt of the application for registration, the Board shall,
within thirty (30) days, notify the applicant of all pertinent
requirements not complied with: And Provided, finally, That the Board
of Investments shall act on said application within ninety (90) days
after submission thereof."
Section 10. Subsection (c) of Section of the same Act
is hereby amended to read as follows:cralaw:red
"(c) Within five (5) years from the date registration
of the export producer, importation machinery and equipment, and spare
parts shipped with such machinery, and equipment, shall not be subject
to tariff duties and compensating tax: Provided, That said machinery,
equipment and spare parts: (1) are not manufactured domestically in
reasonable quantity and quality at reasonable prices; (2) are directly
and actually needed and will be used by the registered enterprise in
the manufacture of its product; (3) are covered by shipping documents
in the name of the registered export producer to whom the shipment will
be delivered direct by customs authorities; and (4) the prior approval
of the Board was obtained by the registered export producer before the
importation of such machinery, equipment and spare parts. For
enterprises approved for registration by the Board after the effective
date of this decree, which are engaged in new preferred non-pioneer
activities with total assets or projected total assets of five hundred
thousand pesos (P500,000.00) or more for the first two (2) years of
commercial operations, the Board, subject to the criteria to be
formulated in consultation with the Secretary of Finance, and to the
above enumerated conditions, shall in lieu of an exemption, reduce
partially the tariff duties and compensating tax on such machinery,
equipment and spare parts, and defer the payment of such reduced taxes
and duties for a period not exceeding ten (10) years, after posting the
appropriate bond as may be required by the Secretary of Finance. For
replacement or modernization of existing facilities of pioneer and
non-pioneer registered enterprises, for expansion of projects with 20%
or greater return on equity, mere deferment in payment of taxes and
duties as above provided shall be allowed without reduction thereof. In
granting approval of importations under this paragraph, the Board shall
require international bidding to be conducted by the end- user in
Manila under its supervision; however, the Board may, in its
discretion, dispense with this requirement if (a) there is, to the
knowledge of the Board, only one manufacturer of the machinery,
equipment, and spare parts to be imported or (b) the importation is
caused by the expansion of the registered export producer and such
imports shall be acquired from the same manufacturer who supplied the
machinery, equipment, and spare parts being used by the registered
export producer or (c) the total cost of importation is less than one
million dollars ($1,000,000.00) or (d) the Board has other means of
determining the reasonableness of the procurement cost. If the
registered export producer does not bring into the country, the
proceeds of export sales equivalent to at least the costs of the
imported machinery, equipment, and spare parts within (5) years after
delivery of the same to it, or if it sells, transfers, or disposes of
the machinery and equipment, and spare parts imported under this
paragraph without the prior approval of the Board within the said five
(5) years, the registered export producer shall pay twice the amount
exemption given it, together with the penalty and interest thereon,
computed from the date of acquisition, fixed by the Tariff and Customs
Code and the National Internal Revenue Code for delinquency in the
payment of said duties and taxes. Likewise, if the registered export
producer sells, transfers or disposes of these machinery, equipment and
spare parts without the prior approval of the Board within five (5)
years from the date of acquisition, the registered enterprises shall
pay twice the amount of tax exemption given it. However, the Board
shall allow and approve the sale, transfer or disposition of the said
items within the said period of five (5) years if made: (1) to another
registered enterprise; (2) for reasons of proven technical
obsolescence; (3) for purposes of the replacement to improve and/or
expand the operations of the enterprise. In such cases, the transferee
shall not be subject to the taxes and duties on the said equipment
other than the deferred taxes and duties, if any, if it will undertake
an economic project substantially carrying the objective for which such
equipment has been imported, as determined by the Board."
Section 11. Section 8 of the same Act is hereby
amended to read as follows:cralaw:red
"Sec. 8. Incentives to registered export traders. — A
registered export trader shall be entitled (a) to the exemption from
export tax provided in paragraph (e) of Section 7 of this Act, for
export products bought by it from registered export producers qualified
to avail of such exemption from export tax; (b) to a tax credit
equivalent to the amount of specific and sales taxes on the registered
export products bought by it from export producers and subsequently
exported; (c) for the first five (5) years from registration, to deduct
from its taxable income, in addition to the normal deductions allowed
by the National Internal Revenue Code, and amount equivalent to ten per
cent (10%) of its total export sales. For a period of five (5) years
after registration, an additional deduction of one per cent (1%) of its
total export sale shall be allowed a registered export trader who
extends financial assistance to a registered export producer or
producers in an amount equivalent to not less than twenty per cent
(20%) of the registered export trader's total export sales during the
year in which the incentive is claimed." chanroblesvirtualawlibrary
Section 12. Section 9 of the same Act is hereby
amended to read as follows:cralaw:red
"Sec. 9. Additional Incentives. — (a) The Board shall
grant additional incentives whenever a registered export producer
establishes its processing or manufacturing plant in an area that the
Board designates as necessary for the proper dispersal of industry or
in an area which the Board finds deficient in infrastructure, public
utilities, and other facilities. These additional incentives shall
consist of any or all of the following: (1) to use an amount equivalent
to double its direct labor cost in applying the formula for reduced
income tax provided in paragraph (b) of Section 7 of this Act; (2) to
apply in payment of taxes that may be due from it to the National
Government, an amount equivalent to one hundred per cent (100%) of
necessary infrastructure works, in harmony with projects approved by
law, undertaken by the registered export producer with the prior
approval of the Board and the concurrence of the Department of Public
Works, Transportation and Communications or any appropriate government
agency, such as portworks, waterworks,rcraft landing facilities, roads
and bridges leading from the plant to a loading point or to a national
highway or poblacion, and other similar projects that are normally
undertaken by the government: Provided, That the title to all such
infrastructure works shall upon completion, be transferred to the
Philippine Government: Provided, further, That should the registered
export producer undertake necessary maintenance work on such
infrastructure works in the prior approval of the Board, a similar
incentive shall be given to in an amount equivalent to the cost of such
necessary maintenance.
(b) Whenever a registered export producer or export
trader shall use a new brand name for an export product that
distinguishes it from products manufactured or processed outside the
Philippines, the Board shall grant the registered export producer
directly exporting its product or export trader who exports the same an
additional incentive in the form of either (1) a net operating loss
carry-over as provided for in Section 7, paragraph (c) of Republic Act
Numbered Fifty-One Hundred Eighty-Six, known as the Investment
Incentives Act; or (2) an additional deduction from taxable income
equivalent to one per cent (1%) of the increment of its export sales
during the year in which the incentive is claimed to the export sales
of the preceding year; Provided, That the registered export producer or
export trader shall choose at the time of applying for said additional
incentives which of the two incentives he prefers to enjoy, and such
choice shall be binding." chanroblesvirtualawlibrary
Section 13. All Acts, Executive Orders,
Administrative Orders, Rules and Regulations or parts thereof
inconsistent with the provisions of this Decree are hereby repealed or
modified accordingly.
Section 14. Effectivity. — This decree shall take
effect immediately upon its approval.
Done in the City of Manila,
this 19th day of June, in the year of Our Lord, nineteen hundred and
seventy-four.
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