Section 4Sec./Art. 4

Investment Incentives. - To insure the continued viability of domestic shipping, and to encourage investments in the domestic shipping industry, the following incentives shall be granted to qualified domestic ship operators:

(a) Exemption from value-added tax on the importation and local purchase of passenger and/or cargo vessels of one hundred fifty (150) tons and above, including engine and spare parts of said vessels: Provided: That the vessels to be imported shall comply with the age limit requirement at the time of acquisition counted from the date of the vessels, original commissioning, as follows; 1) For passenger and/or cargo vessels, the age limit is fifteen (15) years old, 2) For tankers, the age limit is ten (10) years old, and 3) For high-speed passenger crafts, the age limit is five (5) years old; and

(b) Exemption from value-added tax on the importation of life saving equipment , safety and rescue equipment and communication and navigational safety equipment, steel plates and other metal plates including marine-grade aluminum plates, used for transport operations.

The importation of the articles under Section 4(a) and (b) of the Act 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 domestic shipping operator; (3) That said articles are reasonably-needed and will be used exclusively by the registered domestic shipping operator in its transport operations; (4) That the approval of MARINA was obtained prior to the importation of said articles; and (5) That exemption from value-added tax on the importation of said articles shall be granted to all domestic shipping operators within a period of ten (10) years from the effectivity of this Act.

Any sale, transfer or disposition of articles covered under Section 4 (a) and (b) within ten (10) years from the effectivity of this Act to another registered shipping operator 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 value-added tax exemption given him: Provided, further, That if the sale transfer or disposition was made to nonexempt entity or to a party other than a registered domestic ship operator 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 purchasers, 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 article itself, and such lien shall be superior to all charges or liens on the goods, irrespective of the possessor thereof. The Bureau of Internal Revenue (BIR) shall be furnished with notice of actions taken by the MARINA.

(c) 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 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 amended.

(d) Accelerated depreciation. Fixed assets my be depreciated as follows:

(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 (100 years or less; or

(ii) Depreciation 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 domestic shipping operator notifies the BIR at the beginning of the depreciation period which depreciation rate allowed by this section will be used.

CHAPTER III

DEREGULATION OF THE DOMESTIC SHIPPING INDUSTRY-AUTHORITY

OF THE MARITIME INDUSTRY AUTHORITY