Section 2Sec./Art. 2

Section 7 of the same Act is reinstated with amendments, to read as follows;

"SEC. 7. Exemption from Income Tax. - a Philippine shipping enterprise shall be exempt from payment, of income tax on income derived from Philippine overseas shipping for a period of ten (10) years from the date of approval of this Act. Provided, that:

"(a) The entire net income, after deducting not more than fifteen percent (15%) thereof for distribution of profits or declaration of dividends, which would otherwise be taxable under the provisions of Title II of the National Internal Revenue Code, is reinvested for the construction, purchase, or acquisition of vessels and related equipment and/or in the improvement or modernization of its vessels and related equipment in accordance with the regulation; and

"(b) The cumulative amount so reinvested shall not be withdrawn for a period of seven (7) years after the expiration of the period of income tax exemption or until the vessel or related equipment so acquired have been fully paid, which ever date comes earlier.

"Any amount not so invested or withdrawn prior to the expiration of the period stipulated herein shall be subject to the corresponding income tax, including penalties, surcharges and interests."