Question & AnswerQ&A (BOIN)
Republic Act No. 7369 grants tax and duty exemption and tax credit on capital equipment to registered new or expanding enterprises in the Philippines.
A domestic manufacturer is one who meets nationality requirements, manufactures capital equipment eligible for incentives, and whose equipment contains value added equal to a percentage acceptable to the Board.
Conditions include that the machinery is not available domestically in sufficient quantity and quality at reasonable prices, is used exclusively for registered enterprise activities, approval is obtained before purchase, and rated capacity aligns with registered capacity, among others.
Until December 31, 1994, or within five years from the date of registration of the enterprise, whichever comes first.
Spare parts cost should not exceed 10% of the cost of the machinery or equipment they are used for to be eligible for tax exemption.
The certificate is valid for one year from issuance but may be extended in meritorious cases if more than 50% of the capital equipment value has already been imported.
They must give written notice to the Board, inform the date of installation and commercial operation, and allow periodic inspections of the equipment.
Both the vendor and the transferee become solidarily liable to pay twice the amount of taxes and duties waived.
Registered enterprises are entitled to a tax credit equivalent to 100% of the customs duties and national internal revenue taxes that would have been waived if the equipment had been imported.
The value added must be at least 20% of the equipment's selling price, though this may be increased progressively by the Board.