"Art.
39. Incentives to Registered
Enterprises. — All registered enterprises shall be granted the
following
incentives to the extent engaged in a preferred area of investment:
chanrobles virtuallaw libraryred"(a) Income
Tax Holiday. —
"(1) For
six (6) years from commercial operation for pioneer firms and four (4)
years for non-pioneer firms, new registered firms shall be fully exempt
from income taxes levied by the national government.Subject
to such guidelines as may be prescribed by the Board, the income tax
exemption
will be extended for another year in each of the following cases:
"(i) The
project meets the prescribed ratio of capital equipment to number of
workers
set by the Board;
"(ii) Utilization
of indigenous raw materials at rates set by the Board;
"(iii) The
net foreign exchange savings or earnings amount to at least US$500,000
annually during the first three (3) years of operation.
"The
preceding paragraph notwithstanding, no registered pioneer firm may
avail
of this incentive for a period exceeding eight (8) years.
"(2) For
a period of three (3) years from commercial operation, registered
expanding
firms shall be entitled to an exemption from income taxes levied by the
national government proportionate to their expansion under such terms
and
conditions as the Board may determine: Provided, however, That during
the
period within which this incentive is availed of by the expanding firm
it shall not be entitled to additional deduction for incremental labor
expense.
"(3) The
provision of Article 7(14) notwithstanding, registered firms shall not
be entitled to any extension of this incentive.
"(b) Additional
Deduction for Labor Expense. — For the first five (5) years from
registration
a registered enterprise shall be allowed an additional deduction from
the
taxable income of fifty percent (50%) of the wages corresponding to the
increment in the number of direct labor for skilled and unskilled
workers
if the project meets the prescribed ratio of capital equipment to
number
of workers set by the Board: Provided, That this additional deduction
shall
be doubled if the activity is located in less developed areas as
defined
in Article 40.
"(c) Tax
and Duty Exemption on Imported Capital Equipment and its Accompanying
Spare
Parts. — New, expanding/modernizing enterprise which have been
registered
with the Board of Investments on or before December 31, 1994 shall be
exempt
to the extent of one hundred percent (100%) of national internal
revenue
taxes and customs duties on importations of machinery, equipment and
accompanying
spare parts within the prescribed period under its law of registration
or until December 31, 1997 whichever comes first: Provided, however,
That the enterprise which shall register after December 31, 1994 shall
be subject to the provisions of Republic Act No. 7716, and three
percent
(3%) customs duties up to December 31, 1997: Provided, finally,
That the importation of machinery, equipment and accompanying spare
parts
shall comply with the following conditions:
"(1) They
are not manufactured domestically in sufficient quantity, or comparable
quality, and at reasonable prices;
"(2) They
are reasonably needed and will be used exclusively by the registered
enterprise
in its registered activity, unless prior approval of the Board is
secured
for the part-time utilization of said equipment in a non-registered
activity
to maximize usage thereof or the proportionate taxes and duties are
paid
on specific equipment and machinery being permanently used for
non-registered
activities; and
'(3) The
approval of the Board was obtained by the registered enterprise for the
importation of such machinery, equipment and accompanying spare parts.
"In
granting the approval of the importations under this paragraph, the
Board
may require international canvassing but if the total cost of the
capital
equipment or industrial plant exceeds US$5,000,000, the Board shall
apply
or adopt the provisions of Presidential Decree No. 1764 on
international
competitive bidding.
"If
the registered enterprise sells, transfers or disposes of these
machinery,
equipment and spare parts without prior approval of the Board within
five
(5) years from date of acquisition, the registered enterprise and the
vendee,
transferee, or assignee shall be solidarily liable to pay twice the
amount
of the tax exemptions given it. The
Board shall allow and approve the sale, transfer or disposition of the
said items until December 31, 1997 or December 31, 1999 as the case may
be if made:
"(aa) To
another registered enterprise or registered domestic producer enjoying
similar activities;
"(bb) For
reasons of proven technical obsolescence; or
"(cc) For
purpose of replacement to improve and/or expand the operations of the
registered
enterprise.
"(d) Tax
Credit on Domestic Capital Equipment. — A tax credit equivalent to one
hundred percent (100%) of the value of the national internal revenue
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
new
and expanding enterprise registered with the Board of Investments as of
December 31, 1994 which purchases machinery, equipment and spare parts
from a domestic manufacturer: Provided, (1) That the said
equipment,
machinery and spare parts are reasonably needed and will be used
exclusively
by the registered enterprise in its registered activity, unless prior
approval
of the Board is secured for the part-time utilization of said equipment
in a non-registered activity to maximize usage thereof; (2) That the
equipment
would have qualified for tax and duty exemption under paragraph (c)
hereof;
(3) That the approval of the Board was obtained by the registered
enterprise;
and (4) That the purchase is made on or before December 31, 1997 or
December
31, 1999 as the case may be. If
the registered enterprise sells, transfers, or disposes of these
machinery,
equipment and spare parts, the provision in the preceding paragraph for
such disposition shall apply.
"(e) Simplification
of Customs Procedures. — Customs procedures for the importation of
equipment,
spare parts, raw materials and supplies, exports of processed products
by registered enterprises shall be simplified by the Bureau of Customs.
"(f) Unrestricted
Use of Consigned Equipment. — Provisions of existing laws
notwithstanding,
machinery, equipment and spare parts consigned to any enterprise shall
not be subject to restrictions as to period of use of such machinery,
equipment
and spare parts: Provided, That the appropriate re-export bond
is
posted unless importation is otherwise covered under subsections (c)
and
(1) of this Article: Provided, further, That such consigned
equipment
shall be for the exclusive use of the registered enterprise.
"If
such equipment is sold, transferred or otherwise, Article 39(c)(3)
shall
apply.Outward remittance of foreign
exchange covering the proceeds of such sale, transfer or disposition
shall
be allowed only upon prior Bangko Sentral ng Pilipinas approval.
"(g) Employment
of Foreign Nationals. — Subject to the provisions of Section 29 of
Commonwealth
Act No. 613, as amended, a registered enterprise 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 Board: Provided, however, That when the
majority
of the capital stock of a registered enterprise is owned by foreign
investors,
the positions of president, treasurer, and general manager or their
equivalents
may be retained by foreign nationals beyond the period set forth within.
"Foreign
nationals under employment contract within the purview of this
incentive,
their spouses and unmarried children under twenty-one (21) years of
age,
who are not excluded by Section 29 of Commonwealth Act No. 613, as
amended,
shall be permitted to enter and reside in the Philippines during the
period
of employment of such foreign nationals.
"A
registered enterprise shall train Filipinos as understudies of foreign
nationals in administrative, supervisory and technical skills and shall
submit annual reports on such training to the Board.
"(h) Exemption
on Breeding Stocks and Genetic Materials. — The importation of breeding
stocks and genetic materials within ten (10) years from the date of
registration
of commercial operation of 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 obtainable locally in comparable
quality and at reasonable prices; (2) reasonably needed in the
registered
activity; and (3) approved by the Board.
"(i) Tax
Credit on Duty Portion of Domestic Breeding Stocks and Genetic
Materials.
— A tax credit equivalent to one hundred percent (100%) of the value of
national internal revenue taxes and customs duties that would have been
waived on the breeding stocks and genetic materials had these items
been
imported shall be given to the registered enterprise which purchases
breeding
stocks and genetic materials from a domestic producer: Provided,
(1) That said breeding stocks and genetic materials would have
qualified
for tax and duty-free importation under the preceding paragraph; (2)
That
the breeding stocks and genetic materials are reasonably needed in the
registered activity; (3) That approval of the Board has been obtained
by
the registered enterprise; and (4) That the purchase is made within ten
(10) years from the date of registration of commercial operation of the
registered enterprise.
"(j) Tax
Credit for Taxes and Duties on Raw Materials. — Every registered
enterprise
shall enjoy a tax credit equivalent to the national internal revenue
taxes
and customs duties paid on the supplies, raw materials and
semi-manufactured
products used in the manufacture, processing or production of its
export
products and forming part thereof; Provided, however, That the
taxes
on the supplies, raw materials and semi-manufactured products
domestically
purchased are indicated as a separate item in the sales invoice.
"Nothing
herein shall be construed as to preclude the Board from setting a fixed
percentage of exports sales as the approximate tax credit for taxes and
duties of raw materials based on an average or standard usage for such
materials in the industry.
"(k) Access
to Bonded Manufacturing/Trading System. — Registered export-oriented
enterprises
shall have access to the utilization of the bonded warehousing system
in
all areas required by the project subject to such guidelines as may be
issued by the Board upon prior consultation with the Bureau of Customs.
"(l) Exemption
from Taxes and Duties on Imported Spare Parts. — Importation of
required
supplies and spare parts for consigned equipment or those imported tax
and duty-free by a registered enterprise with a bonded manufacturing
warehouse
shall be exempt from customs duties and national internal revenue taxes
payable thereon: Provided, however, That such spare parts and
supplies
are not locally available at reasonable prices, sufficient quantity and
comparable quality: Provided, finally, That all such spare parts and
supplies
shall be used only in the bonded manufacturing warehouse of the
registered
enterprise under such requirements as the Bureau of Customs may impose.
"(m) Exemption
from Wharfage Dues and Export Tax, Duty, Imposts and Fee. — The
provision
of law to the contrary notwithstanding, exports by a registered
enterprise
of its non-traditional export products shall be exempted from any
wharfage
dues, and any export tax, duty impost and fee."