Article 61p. 61

NATURAL RESOURCES AND ENVIRONMENTAL LAWS STATUTES and IMPLEMENTING RULES AND REGULATIONS

contract area in accordance with the regulations of the

Bureau of Forest Development."

Sec. 16-C Water Rights. A coal operator shall also enjoy

water rights necessary for the exploration, development

and

exploitation

of

his

coal

contract

area

upon

application filed with the Director of the Bureau of

Public Works in accordance with the existing laws of

water

and

the

rules

and

regulations

promulgated

thereunder; Provided, that water rights already granted

or

legally

existing

shall

not

thereby

be

impaired;

Provided, further, that the government reserves the right

to

regulate

water

rights

and

the

reasonable

and

equitable distribution of water supply so as to prevent

the monopoly of the use thereof."

Sec.

16-D

Applicability

of

Certain

Provisions

of

Presidential Decree No. 463 The provisions of Chapter

XIV (Penal Provisions) of Presidential Decree No. 463,

otherwise

known

as

the

"Mineral

Resources

Development Decree of 1974" shall be applicable to the

coal operations; Provided, that any reference therein to

the Decree and to the Bureau Director of Mines shall

mean

Presidential

Decree

No. 972 and the Energy

Development Board, respectively.

Section

17.

Incentives

to

Coal

Users.

The

following

incentives

shall

be granted to enterprises/industries

which will convert their existing oil fired plants facilities

to make the same adaptable for coal burning:

(a)

Tax

Exemption on Imported Capital Equipment.

Within seven (7) years from the date of approval of the

plan for conversion of existing oil fired plants and

facilities to make the same adaptable for coal burning,

the importation of machinery and equipment, and spare

parts shipped with such machinery and equipment

necessary to implement their program of conversion

shall not be subject to tariff and customs duties and

compensating

tax;

Provided,

that

said

machinery,

equipment and spare parts are:

1. Not manufactured in the Philippines in reasonable

quantity and quality at reasonable prices;

2.

Directly

and

actually

needed

and

will

be

used

exclusively in the implementation of the conversion of

existing plants to coal burning;

3. Covered by shipping documents in the name of the

enterprise to whom the shipment will be delivered direct

by customs authorities;

4. Prior approval, before importation of such machinery,

equipment and spare parts was obtained. If imported

machinery,

equipment

and

spare

parts

are

sold,

transferred

or

otherwise

disposed

of

without

the

required prior approval, the importer shall pay twice the

amount of the tax and duty thereon. However, the sale,

transfer or disposition of the said items shall be allowed

and approved without tax and duty if made to another

company for use in:

(a) Converting its existing plants to coal burning subject

to

the

same

conditions

and

limitations

as

herein

provided;

(b) For reasons of technical obsolescence; or

(c) For replacement of equipment to improve and/or

expand the operations of the enterprise.

For replacement of modernization of existing facilities of

subject

enterprises/industries

which

will

be

utilized

partly or entirely in the conversion of coal burning, in lieu

of an exemption from payment of tariff duties and taxes,

it shall be granted deferment in the payment of such

taxes and duties for a period of not exceeding ten (10)

years after posting the appropriate bond as may be

required by the Secretary of Finance.

(b) Tax Credit on Domestic Capital Equipment. Within

seven (7) years from the date of approval of the plan for

conversion of existing oil fired plants, and facilities to

make the same adaptable for coal burning, a tax credit

equivalent to one hundred per cent (100%) of the value

of the compensating tax and customs duties that would

have been paid on machinery, equipment and spare

parts necessary to implement the program of conversion

had these items been imported, shall be given to the

industry with a program of conversion to coal burning

that purchases said machinery, equipment and spare

parts from a domestic manufacturer; Provided:

1. That said machinery, equipment and spare parts are

directly and actually needed and will be used exclusively

in the implementation of the conversion of its existing

plants to coal burning;

2. That the prior approval was obtained for the purchase

of the machinery, equipment and spare parts. If the

machinery,

equipment

and

spare

parts

are

sold,

transferred

or

otherwise

disposed

of

without

the

required prior government approval, the purchaser shall

pay twice the amount of the tax credit given to it.

However, the sale, transfer or disposition of the said

items shall be allowed and approved without tax if made:

a) To another company for use in its approved program

of conversion to coal burning subject to the same

conditions and limitations as herein provided:

b) For reasons of technical obsolescence; or

c)

For

purposes

of

replacement to improve and/or

expand the operation of the enterprise.

(c) Net operating Lose Carryover. A net operating loss

incurred in any of the first ten (10) years after the start of

the implementation of the coal conversion program may

be carried over as a deduction from taxable income 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 (6) taxable years following the loss, and

any portion of such loss which exceeds the taxable

income of such first year shall be deducted in like

manner from the taxable income of the next remaining

five (5) years. The net operating loss shall be computed

in accordance with the provision of the National Internal

Revenue Code, any provision of this Decree to the

contrary

notwithstanding,

except

that

income

not

taxable either in whole or in part under this or other laws

shall be included in the gross income.

(d)

Capital

Gains

Tax

Exemption.

Exemption

from

income tax on the proceeds of the gains realized from

the sale, disposition or transfer of capital assets which

are sold or disposed of as a result of the conversion of

facilities to a coal burning plant; Provided, that such sale,

disposition or transfer are registered with the Bureau of

Internal Revenue; Provided, however, that the gains

realized from the subject sale, disposition or transfer of

capital assets are invested in new issues of capital stock

of

an

enterprise

registered

under

the

Investment

Incentives Act, as amended, and other allied incentives

laws;

Provided,

further,

that

the

shares

of

stock

representing

the

investment

are

not

disposed

of,

transferred, assigned, or conveyed for a period of seven

(7) years from the date the investment was made; and,

Provided, finally, that if such shares of stock are disposed

of within the said period of seven (7) years, all taxes due

on the gains realized from the original transfer, sale, or

disposition

of

the

capital

assets

shall

become

immediately due and payable.

© 2018 Compiled by RGL

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