Article 10Supplement v1, p. 10

COMMERCIAL LAWS SUPPLEMENT

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

© Compiled by RGL

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