Question & AnswerQ&A (Republic Act No. 7918)
Republic Act No. 7918 amends Article 39, Title III of Executive Order No. 226, also known as the Omnibus Investments Code of 1987, to provide incentives to registered enterprises engaged in preferred areas of investment.
Pioneer firms are granted a six (6) year income tax holiday from commercial operation, while non-pioneer firms are granted four (4) years.
The income tax holiday may be extended for another year if the project meets the prescribed ratio of capital equipment to workers, utilizes indigenous raw materials at prescribed rates, or if the net foreign exchange savings or earnings amount to at least US$500,000 annually during the first three years of operation.
No registered pioneer firm may avail of the income tax holiday for more than eight (8) years.
Registered enterprises are allowed an additional deduction from taxable income of fifty percent (50%) of the wages corresponding to the increment in the number of direct skilled and unskilled workers for the first five (5) years from registration, which is doubled if located in less developed areas.
They are exempt from 100% of national internal revenue taxes and customs duties on imports of machinery, equipment, and spare parts within prescribed periods, with different provisions depending on the enterprise's registration date and location.
Both the registered enterprise and the transferee are solidarily liable to pay twice the amount of the tax exemptions granted.
They must not be available locally in comparable quality or reasonable prices, be reasonably needed in the registered activity, and be approved by the Board within ten years from the date of registration or commercial operation.
Yes, they may employ foreign nationals in supervisory, technical, or advisory positions for up to five years, extendible at the Board's discretion. Foreign nationals may hold president, treasurer, and general manager positions beyond this period if majority-owned by foreign investors.
A tax credit equivalent to 100% of the value of national internal revenue taxes and customs duties waived for imported counterparts is granted, provided approvals and conditions are met.