Tax Exemption for Philippine Overseas Shipping Entities
- Filipino citizens or corporations (with ≥60% Filipino ownership) engaged exclusively in overseas shipping or construction of ocean-going vessels are exempt from income tax for 10 years from enactment.
- Profits earned must be reinvested in vessel construction, purchase, acquisition, or equipment maintenance.
Appropriation for Vessel Acquisition and Financing
- Annual appropriation of ₱20 million from the National Treasury or loans for five fiscal years starting 1955-56.
- Funds allocated for building, purchasing, or acquiring ocean-going vessels for resale, lease, or charter to qualified Filipino entities.
- Loans can also be granted to finance vessel acquisition and operation by Filipino citizens or corporations (≥60% Filipino ownership).
Administration of Funds by National Development Company (NDC)
- NDC manages and invests appropriated funds.
- Authorized to acquire vessels, grant loans, conduct applicant feasibility studies, and decide loan advisability.
Loan Terms and Security
- Loans secured by preferred mortgage on vessels, including associated equipment and operating certificates.
- Maximum loan term: 20 years; interest capped at 5.5% per annum.
- Loans limited to 75% of vessel cost with full insurance mandatory.
- Transfers or encumbrances of rights under vessel agreements require NDC consent.
Special Fund for Loan Repayments
- Loan principal and interest repayments constitute a special fund exclusively used to implement this Act.
Foreclosure Rights and Vessel Acquisition by NDC
- NDC authorized to acquire vessels via foreclosure or purchase using funds.
- Acquired vessels may be leased or chartered on bare-boat basis at up to 7% annual cost.
- Resale limited to responsible Filipino citizens or corporations with ≥60% Filipino ownership, ensuring continuity of service.
Use of Government Services for NDC Investigations
- NDC can request free services of government officers and employees for studies related to loan applications, with agency approval.
Rulemaking and Reporting
- NDC empowered to issue rules and regulations for Act implementation.
- Required to submit annual reports to Congress on activities.
Presidential Powers in War and Emergencies
- The President may seize vessels of Philippine registry for naval/military use during war or national emergencies.
- Fair compensation paid based on vessel value or charter value.
- Disputes resolved by a three-appraiser panel, whose decision is final.
Definition of International Trade for Philippine-Flagged Vessels
- An ocean-going Philippine vessel is engaged in international trade when transporting goods/passengers between Philippine and foreign ports or between foreign ports.
Dollar and Import Tax Provisions for Vessel Operations
- Central Bank or authorized agency must provide dollars for vessel purchase, repairs, equipment, and operating expenses in foreign ports or high seas.
- Such transactions are exempt from exchange tax.
- Vessels’ repair materials are exempt from special import tax with certification from National Shipyards and Steel Corporation.
- Proper accounting for foreign currency transactions is mandatory.
Repeal of Inconsistent Laws
- Laws, orders, or regulations inconsistent with this Act are repealed.
Effectivity
- The Act took effect upon approval on September 9, 1955.