Law Summary
Tax Exemptions and Conditions
- Production, manufacture, and sale of cottage industry products are exempt from all taxes except specific and income taxes for five years from registration.
- At least 75% of raw materials used must be of Philippine origin, except for embroidery, piggery, poultry, livestock, and metal crafts.
- No exemption from percentage taxes on sales exceeding two hundred thousand pesos annually.
- The law on cooperatives remains unaffected.
Transfer of Machinery and Equipment
- Sale, lease, pledge, or transfer of machinery and equipment imported tax-exempt to another cottage industry entity requires payment of appropriate duties and taxes.
- Transfers to non-cottage industry entities entail double duties and taxes according to existing laws.
- All such transactions must be reported to NACIDA and the Commissioner of Customs.
Transition Provisions for Existing Cottage Industries
- Registered entities with capitalization exceeding fifteen thousand pesos prior to this Act enjoy tax exemptions only for a maximum of three months post-approval or until the expiration of five years from original registration—whichever occurs first.
Reporting Obligations
- The Secretary of Commerce and Industry must submit an annual report detailing taxes waived for each registered cottage industry to the Presiding Officers of both Houses of Congress thirty days before opening the regular session.
Effectivity
- The Act takes effect upon approval.