MALACAÑANG has released an executive order (EO) extending investors’ duty-free incentive for imported machinery and equipment, but only for a year or until Congress passes a law making it permanent.
Executive Order 22, signed by President Rodrigo Duterte last April 28, replaces EO 70 that expired last May 9. EO 70 granted the incentives to investors registered with the Board of Investments (BOI) for a five-year period beginning May 2012.
Under the EO, qualified BOI-registered business enterprises will be exempted from paying duties when they acquire capital equipment from other countries under specific chapters of the Tariff and Customs Code of the Philippines.
“Considering that importation of capital equipment is one of the major cost burdens of business enterprises in their start-up operations and expansion, there is a need to extend the zero duty on importation on capital equipment, spare parts, and accessories currently being enjoyed by BOI-registered enterprises,” the EO states.
It acknowledged that the grant of duty-free importation of capital equipment “remains to be an important fiscal incentive in promoting investments into the Philippines considering the global competition for foreign direct investments.”
The duty exemption, however, will only be granted upon the issuance by the BOI of a certificate of authority to the importing company. The privilege, however, strictly applies to equipment not manufactured locally or of insufficient supply domestically, and for the exclusive use of the registered firm.
Importers cannot sell the equipment within a five-year period without the permission of the BOI, an agency attached to the Department of Trade and Industry (DTI) that grants incentives to investors outside of economic zones.
“The BOI-registered enterprise cannot sell, transfer or dispose of the aforementioned equipment, machinery, spare parts and accessories, without prior BOI approval, within five years from the date of importation; otherwise, the BOI-registered enterprise will be solidarily liable to pay twice the amount of the duty foregone or P500,000, whichever is higher, without prejudice to other applicable penalties,” the EO states.
President Duterte also signed a separate order, EO expanding the coverage of lower tariffs on information technology (IT) products under the 1997 Information Technology Agreement of the World Trade Organization (WTO), as agreed upon by 24 WTO members in December 2015.
In a statement, the DTI said the extension of the capital equipment incentive will help the government attract more “innovation-led and technology-driven investment projects.”
Ceferino Rodolfo, Trade undersecretary and BOI managing head, said the capital equipment incentive is necessary to draw high-value, high-impact, and socially relevant investment projects, especially start-ups that are expanding and companies that are upgrading their equipment.
“The measure also augurs well with the agency’s 2017 Investment Priorities Plan (IPP) which encourages more innovation-driven and job-generating investment projects that will eventually lead us to modernize the Philippine economy,” he said.
The 2017 IPP, which lists investment activities eligible for BOI perks such as income tax holidays, covers agribusiness and tourism; manufacturing; IT and IT-enabled services for the domestic market and telecommunications services for new market players; environment and climate change-related projects; local government-initiated public-private partnership projects; drug rehabilitation centers; and state-of-the-art engineering, procurement and construction services.
with CATHERINE S. VALENTE