Section 86Sec./Art. 86

Fiscal Incentives Available to TEZ Operators and Registered Enterprises. - The following incentives may, in the discretion of the TIEZA Board, be granted to registered tourism enterprises within TEZs:

(a) Income Tax Holiday. New enterprises in Greenfield and Browdeld Tourism Zones shall, from the start of business operations, be exempt from tax on income for a period of six (6) years. This income tax holiday may be extended if the enterprise undertakes a substantial expansion or upgrade of its facilities prior to the expiration of the first six (6) years.

This extension shall consider the cost of such expansion or upgrade in relation to the original investment, but shall in no case exceed an additional six (6) years. These enterprises shall likewise be allowed to carry over as deduction from the gross income for the next six (6) consecutive years immediately following the year of the loss, their net operating losses for any taxable year immediately preceding the current taxable year which had not been previously offset as deduction from gross income.

An existing enterprise in a Brownfield Tourism Zone shall likewise enjoy the incentives extended to new enterprises in Green6eld and Brownfield Tourism Zones mentioned in the preceding paragraph. An existing enterprise in a Brownfield Tourism Zone shall be entitled to avail of a non - extendible income tax holiday if it undertakes an extensive expansion or upgrade of facilities.

Such an income tax holiday shall consider the cost of such expansion or upgrade in relation to the original investment, but shall in no case exceed six (6) years to be counted from the time of completion of the expansion or upgrade: Provided, That capital expenditures subject to income tax holiday shall be understood to mean money spent to acquire or upgrade physical assets, such as buildings, machinery and equipment, intended to extend the life of an asset or increase the capacity or efficiency of a tourism enterprise that benefit the current and future periods: Provided, further, That in case of expansion involving the improvement of existing structures or constructing new ones, such expansion shall consider the substantial amount infused, the substantial number of rooms added or constructed and, where applicable, their change in classification from three - star to five - star establishments.

The provisions of this subsection shall likewise apply to tourism enterprises outside the zones.

(b) Gross Income Taxation. In lieu of all other national and local taxes, license fees, imposts and assessments, except real estate taxes and such fees as may be imposed by the TIEZA, a new enterprise shall pay a tax of five percent (5%) on its gross income earned, which shall be distributed as follows:

(1) One - third to be proportionally allocated among affected LGUs;

(2) One - third to the national government; and

(3) One - third to the TIEZA for the funding of its operations and its programs in the TEZs, which shall include the protection, maintenance and enrichment of the environment, tangible cultural and historical heritage, and the intangible cultural heritage of communities within and surrounding the TEZs.

Gross income as used herein is defined under Section 27(A) of the NIRC, and further defined under relevant rules and regulations.

(c) Capital Investment and Equipment. Subject to rules and regulations which properly define capital investments and equipment necessary for various kinds of tourism enterprises, registered enterprises shall be entitled to an exemption of one hundred percent (100%) of all taxes and customs duties on importations of capital investment and equipment.

(d) Transportation and Spare Parts. Importation of transportation and the accompanying spare parts of new and expanding registered enterprises shall be exempt from customs duties and national taxes: Provided, That they are not manufactured domestically in sufficient quantity, of comparable quality and at reasonable prices, and that they are reasonably needed and will be used exclusively by an accredited tourism enterprise.

(e) Goods and Services. Subject to rules and regulations which properly define goods and services necessary for various kinds of tourism enterprises, registered enterprises shall be entitled to the following: (1) Importation of goods actually consumed in the course of services actually rendered by or through registered enterprises within a TEZ shall enjoy one hundred percent (100%) exemption from all taxes and customs duties: Provided, however, That no goods shall be imported for the purpose of operating a wholesale or retail establishment in competition with the DFPC; and

(2) A tax credit equivalent to all national internal revenue taxes paid on all locally - sourced goods and services directly or indirectly used by the registered enterprise for services actually rendered within the TEZ.

(f) Social Responsibility Incentive. A registered enterprise shall be entitled to a tax deduction equivalent to a reasonable percentage, not exceeding fifty percent (60%), of the cost of environmental protection or cultural heritage preservation activities, sustainable livelihood programs for local communities, and other similar activities.ten.lihpwal