Key Definitions Under the Act
- Act refers to Republic Act No. 7471, the Philippine Overseas Shipping Development Act.
- Philippine Overseas Shipping involves transport by Philippine-registered vessels operated by Philippine Shipping Enterprises, excluding domestic shipping.
- Philippine Shipping Enterprise means a Filipino-owned association or corporation with at least 60% Filipino capital.
- MARINA is the Maritime Industry Authority; Administrator is its head.
- Monetary Authority is the Central Bank and agencies managing foreign exchange.
- Vessel means a ship built or constructed for overseas shipping meeting international classification.
- Acquisition includes purchase, importation, or lease-purchase of vessels.
Qualification Requirements for Applicants
- Must be accredited/registered as an overseas shipping company per MARINA Memorandum Circular No. 33-A or 51.
- Must meet other qualifications as required by MARINA.
Modes of Financing Vessel Acquisition
- Financing may come from:
- The Philippine Banking System.
- Other sources outside the banking system.
- A combination of both.
- Any other acceptable mode.
Foreign Exchange and Financial Incentives
- Foreign exchange from Philippine Banking System available for:
- Vessel purchases for Philippine registration.
- Vessel repairs, drydocking, refitting abroad.
- Importation of spare parts.
- Other vessel operation costs abroad.
- Servicing of foreign currency obligations must be approved and registered with Monetary Authority.
- Vessels can also be financed from sources outside Philippine banking system per CB Circular 1353.
Import Duty and Tax Exemptions
- Exemptions on import duties and taxes for:
- Vessels under Philippine flag registration.
- Spare parts for repair or overhaul destined for MARINA-accredited drydock or vessel installation.
- Unauthorized location of imported items results in penalties for full duties and taxes.
Tax Credit for Local Suppliers
- Local manufacturers/dealers selling machinery, equipment, materials, and spare parts to Philippine Shipping Enterprises are entitled to tax credits for actual import duties and taxes paid, subject to SecFinance approval based on MARINA recommendation.
Income Tax Exemption Provisions
- Income from Philippine Overseas Shipping is exempt from income tax until May 5, 2002.
- Net income (less up to 10% for dividends) must be reinvested by May 5, 2005 for vessel acquisition or modernization.
- Reinvested amounts cannot be distributed as profit/dividend until May 5, 2012 or until fully paid.
- Non-reinvested or prematurely withdrawn amounts are subject to tax with penalties.
- Exemption applies only to income directly from overseas transport.
- Reporting to BIR is mandatory, with prescribed documents.
Application Procedures
- Written applications for incentives must be filed with MARINA.
- For acquisition of vessels, supporting documentation includes vessel certificates, Board resolutions, ownership certificates, loan agreements, and authenticated documents.
- For construction of vessels, additional documents include shipbuilding contracts, bill of materials, quotations from shipbuilders, and classification certifications.
- Spare parts import applications require pro-forma invoice and other MARINA-required documents.
- Income tax exemption applications require MARINA endorsement and supporting applicant documents.
Implementation and Processing
- MARINA returns disapproved applications with reasons.
- Approved applications are processed with recommendations to appropriate agencies:
- Foreign exchange requests to Authorized Agent Banks/Monetary Authority.
- Vessel acquisition implementation.
- Import duty exemptions to Bureau of Customs.
- Tax credits to Secretary of Finance.
- Income tax exemption to Bureau of Internal Revenue.
Registration and Deletion of Vessels
- Vessels must be registered under Philippine flag to avail incentives.
- Deletion from registry allowed only if no other Filipino enterprise interested or if scrapping vessel.
- Applications for deletion require MARINA approval, Board resolutions, proof of sale offers, and other documents.
Appeals
- Appeals on MARINA decisions must be filed with Secretary of Transportation and Communications within 30 days.
Requisition of Vessels in National Emergency
- The President can requisition Philippine-registered vessels for naval/military use during war or emergency.
- Owner compensated with fair market value (if absolute) or fair charter value (if temporary).
- Disputes resolved by an Arbitration Committee with members appointed by MARINA, owner, and a chairman agreed by both.
- Committee decision is final and binding.
- Arbitration expenses borne by losing party.
Interpretation
- Interpretations will align with the declared policy to give full effect to the Act.
Penal Provisions
- Violations punishable by fines up to P10,000, imprisonment up to 5 years, or both.
- If violation by corporation/association, penalties apply to responsible officers.
- Government officials violating the law are dismissed immediately and subjected to additional administrative penalties.
Annual Reporting
- MARINA, coordinating with Monetary Authority and Department of Finance, files annual reports to President and Congress.
- Reports include foreign exchange usage, tax exemptions granted, vessels acquired or improved, and other relevant data.
- Reports distributed to government agencies and interested entities.
Repealing and Separability Clauses
- Inconsistent rules are repealed or modified.
- If any provision declared invalid, remainder remains effective.
Effectivity
- Rules take effect 15 days after publication in a newspaper of general circulation in the Philippines.