Law Summary
Definitions of Key Terms
- "Act": Republic Act No. 7686.
- "Appropriate Authority": Government entity overseeing formal technical and vocational education and training.
- "Dual Training System": A combined instructional system integrating in-plant training and in-school instruction, collaboratively managed by accredited educational institutions and establishments.
- "Trainee": Person qualified to undergo training under the Dual Training System.
- "Accredited Dual Training System Educational Institution/Training Center": Public or private institutions authorized to participate in the system.
- "Establishment": Agricultural, industrial, or business enterprises participating in the system.
- "Accredited Dual Training System Agricultural, Industrial or Business Establishment": Authorized enterprises recognized to participate.
- "Taxable Income": Gross income minus allowable deductions as defined under the NIRC and special laws.
Tax Incentives for Participating Establishments
- Eligible entities include corporations, sole proprietorships, partnerships, and cooperatives.
- 50% deduction from taxable income of actual expenses paid to accredited educational institutions for trainees, capped at 5% of total direct labor expenses or PHP 25 million annually.
- Donations or contributions for system operation deductible up to 3% of taxable business income; full deduction if system is a National Priority Program per NEDA.
- Exemption from donor's tax, with a maximum of 30% of gifts used for administrative costs.
Incentives for Participating Educational Institutions
- Tax and duty exemption on importation of essential equipment, apparatus, and materials used in the dual training system.
- Importation subject to specific qualifications as detailed in the regulations.
Procedures for Availing Incentives by Establishments
- Submission of required documents to the Revenue District Office including:
- Letter of application,
- Memorandum of Agreement among parties,
- Accreditation certificates,
- Affidavits evidencing amounts paid or received,
- Financial statements,
- Registration documents (SEC/DTI),
- Corporate documents detailing business nature.
Procedures for Availing Incentives by Educational Institutions
- Application for tax exemption filed with the Revenue Office, Department of Finance.
- Required supporting documents include shipping documents, commercial invoices, accreditation certification from TESDA, affidavits of exclusive use, registration certificates, and proof of non-availability of goods locally.
- Imported articles must be marked to indicate tax and duty-free status and cannot be sold or transferred without approval.
List of Essential Equipment
- Jointly formulated by TESDA, DTI, and BIR.
- Defines equipment, apparatus, and materials eligible for tax and duty exemption.
Inspection Authority
- Department of Finance may inspect before or after approval to ensure compliance with conditions.
Automatic Appropriation for Import Taxes and Duties
- Taxes and duties waived on imports by accredited establishments and educational institutions are automatically charged against contingency funds.
- Initial implementation funded with PHP 1 million; subsequent funding as necessary.
Preservation of Existing Incentives
- The Act and regulations do not diminish existing privileges under other laws or executive issuances.
Repealing Clause
- Inconsistent laws, decrees, orders, or regulations are repealed or amended accordingly.
Effectivity
- Regulations take effect after publication in two newspapers of general circulation.
Illustrative Example (Annex A Summary)
- Company A with PHP 5,000,000 net income, labor cost of PHP 1,500,000, and donations of PHP 180,000 for trainees.
- Tax deduction computations detailed considering limitations and applicable tax dues.
This comprehensive regulatory framework integrates key definitions, delineates procedural requirements for availing tax incentives, outlines the scope of benefits for both establishments and educational institutions, and establishes mechanisms for compliance monitoring and funding to promote the dual training system nationwide.