North Luzon Railways Corporation (NorthRail) (1)

August 7, 2008 FIRB RESOLUTION NO. 012-08 SUBJECT MATTER : North Luzon Railways Corporation (NorthRail) (1) WHEREAS, the North Luzon Railways Corporation (NorthRail) is mandated to develop, construct, operate and manage a railroad system to serve Metro Manila, Central and Northern Luzon; aIAEcD WHEREAS, the NorthRail is currently implementing the NorthRail Project Phase 1 Section 1 covering the alignment of a rail line from Caloocan City to Malolos, Bulacan and Section 2 covering Malolos, Bulacan to Clark, Pampanga; WHEREAS, Section 7.1 of the Credit Loan Agreement executed by the Republic of the Philippines (RP) through the Department of Finance (DOF) and the People's Republic of China (PROC) through the Export-Import Bank of China for the financing of the NorthRail Project Phase 1 Sections 1 and 2 provide that "All taxes, duties and other charges levied by the Government of the Philippines shall be borne by the employer", and NorthRail is the employer under the said agreement; cCaDSA WHEREAS, Section 7.2 of the said Credit Loan Agreement provides that "The employer shall pay the customs duties, VAT or any other taxes/charges"; WHEREAS, a Preferential Loan Agreement was entered into by the above stated parties to facilitate the utilization of the US$500 Million Preferential Buyer's Credit extended by the Export-Import Bank of China to RP to finance the construction of NorthRail Project Phase 1 Section 2; WHEREAS, the NorthRail does not have the financial capacity to assume the taxes and duties arising from the implementation of the NorthRail Project Phase 1 Sections 1 and 2; aScIAC NOW, THEREFORE, BE IT RESOLVED, AS IT IS HEREBY RESOLVED, to grant tax subsidy to the NorthRail to in the amount of SEVEN HUNDRED FORTY MILLION FORTY THOUSAND (P740,040,000.00) to cover the taxes and duties due on the importation of materials and equipment arising from the implementation of the NorthRail Project Phase 1 Sections 1 and 2. Provided, however, that: (a) the initial issuance of the corresponding Certificate of Entitlement to Subsidy (CES) shall be limited to the amount of P212,113,897.60 only representing the taxes and duties on importations [three (3) shipments] with billings from the Bureau of Customs (BOC) (P1,239,934.00) and value-added tax on payment of goods and services for the first and second quarter of 2008 (P210,873,963.60) (Annex A); (b) the subsequent CES shall be issued only upon the submission by the NorthRail to the FIRB of required billings and/or documents evidencing the importations; and (c) all materials and equipment for which tax subsidy is granted shall form part of the regular inventory of the NorthRail (in the case of materials and movable equipment) and/or be located in their designated project stations/operating areas (in the case of immovable equipment) as certified to by the resident Commission on Audit (COA) auditor of the NorthRail and its Project Station/Operating Area Manager, respectively. Provided, finally, that the grant of such subsidy shall be in accordance with the terms and conditions of Section 14 of the 2008 General Appropriations Act subject to the availability of funds therefor, pursuant to the terms and conditions of the Rules and Regulations to Implement the Subsidy Provision Under Executive Order No. 93. (SGD.) GIL S. BELTRAN Undersecretary of Finance Presiding Officer FIRB Reference: Joint FIRB-Technical Committee Meeting dated August 7, 2008. ATTACHMENT REPUBLIC OF THE PHILIPPINES DEPARTMENT OF FINANCE BUREAU OF INTERNAL REVENUE Revenue Region No. 8 Revenue District Office No. 44 Taguig and Pateros July 23, 2008 MR. GEL S. BELTRAN Chairman, Technical Committee Fiscal Incentive Review Board Department of Finance Building Agrifina Circle, Manila Attention: LINA D. ISORENA Head, Secretariat (NTRC) Dear Sir: This refers to the request of North Luzon Railways Corporation (North Rail) dated March 28, 2008 for tax subsidy covering taxes and import duties for the 1st Semester of FY 2008 amounting to P210,873,963.60 which pertains to 12% VAT on payment of goods and services, due the Bureau of Internal Revenue, to wit; Taxes 1st Qtr. 2nd Qtr. Total Due to BIR 12% VAT on payment Chinese 129,873,963.60 81,000,000.00 210,873,963.60 of goods and services Contractor-CNMEG Due to BOC 20% Customs Duties Chinese 1,239,934.00 106,886,367.00 108,126,301.00 and Taxes Contractor-CNMEG Total 131,113,897.60 187,886,367.00 319,000,264.60 ============ ============ ============ This project is under the jurisdiction of Revenue District No. 44 for revenue collection purposes having been located at the registered business address of 2/F Old Officers Clubhouse, Jusmag Area, Fort Bonifacio Taguig. SADECI Very truly yours, (SGD.) LEIDA G. BUSCAINO Revenue District Officer