Section 19Sec./Art. 19

Shipbuilding and Ship Repair Investment Incentives. - To encourage investments and to and ensure the development of a viable shipbuilding and ship repair industry, the following incentives are hereby granted:

(a) Exemption from value-added tax on the importation of capital equipment, machinery, spare parts, life-savings ang navigational equipment, steel plates and other metal plates including marine -grade aluminum plates to be used in the construction, repair, renovation or alteration or any merchant marine vessel operated or to be operated in the domestic trade.

The importation of the above articles shall be granted exemption from value-added tax subject to the following conditions: (1) That said articles are not manufactured domestically in sufficient quantity, of comparable quality and at reasonable prices; (2) That said articles are directly imported by a MARINA-registered shipbuilders and ship repairer; (3) That said articles are reasonably needed and will be used exclusively by the registered shipbuilders and ship repairer; (4) That the approval of MARINA was obtained prior to the importation of said articles ; and (5) That shipbuilders and ship repairers may avail of the exemption from value-added tax provided herein within a period of ten (10) years from the approval of this Act.

Any sale, transfer or disposition of articles under Section 19 (a) within ten (10) years from the effectivity of this Act to another registered shipbuilder or repairer enjoying similar incentive shall require prior approval of MARINA.

If the sale, transfer or disposition was made without prior approval of MARINA, both the vendor and the transferee or assignee shall be liable to pay twice the amount of the value-added tax exempt given him: Provided, further, That if the sale, tranfer or disposition was made to a nonexempt entity or to a party other than that a registered shipbuilder or repairer within ten (10) years from the effectivity of this Act, both the vendor and the transferee or assignee shall be solidarily liable to pay twice the amount of the value-added tax waived; Provided, finally, That the sale, transfer or disposition made after ten (10) years from the effectivity of this Act shall be made by Informing MARINA in writing.

The purchaser, transferees or recipients shall be considered the Importers thereof, who shall be liable for any internal revenue tax on such importation. The tax due on such importation shall constitute a lien on the foods superior to all changes or liens on the goods, irrespective of the possessor thereof. The BIR shall be furnished with notice of actions taken by the MARINA.

(b) Net operating loss carry-over. A net operating loss in any taxable year immediately preceding the current taxable year, which had not been previously offset as a deduction from gross income shall be carried over as a deduction from gross income for the next three (3) consecutive taxable years immediately following the year of such loss subject to the pertinent provisions of the National Internal Revenue Code of 1997, as amemded;

(c) Accelerated depreciation. Fixed assets may be depreciated as follow:

(i) To the extent of not more than twice as fast as the normal rate of depreciation or depreciated at normal rate of depreciation if the expected life is ten (10) years or less; or

(ii) Depreciated over any number of years between five (5) years and the expected life if the latter is more than ten (10) years, and the depreciation thereon allowed as deduction from taxable income. Provided, That the registered shipbuilder and ship repairer notifies the BIR at the beginning of the depreciation period which depreciation rate allowed by this section will be used.