North Luzon Railways Corporation (NorthRail) (2)

August 14, 2009 FIRB RESOLUTION NO. 012-09 SUBJECT MATTER : North Luzon Railways Corporation (NorthRail) (2) 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; 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, to effectively implement the Project, the NorthRail has contracted a loan agreement with Barclays Capital Bank, PLC of England and for which reason documentary stamp tax (DST) is due and payable; WHEREAS, the NorthRail is also liable to pay the 2% withholding tax on payments made to the progress billings to CNMEG as required under Section 57 of the National Internal Revenue Code; EIDATc 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 provides 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; 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, 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 and the taxes due on the loan agreement; NOW, THEREFORE, BE IT RESOLVED, AS IT IS HEREBY RESOLVED, to grant tax subsidy to the NorthRail in the amount of FOUR HUNDRED NINETEEN MILLION SIX HUNDRED SIXTY THOUSAND PESOS (P419,660,000.00) only 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; documentary stamp taxes due on the US$90M loan agreement with the Barclays Capital Bank, PLC of England; and 2% withholding tax on the progress billings to CNMEG: Provided, however, that: (a) the corresponding Certificate of Entitlement to Subsidy (CES) shall be issued only upon the submission by the NorthRail to the FIRB of required billings and/or documents evidencing the importations and the assessments for taxes due on the loan; and (b) 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, further, that the grant of such subsidy shall be in accordance with the terms and conditions of Section 13 of the 2009 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. aCcSDT (SGD.) GIL S. BELTRAN Undersecretary of Finance Presiding Officer FIRB Reference: Joint FIRB-Technical Committee Meeting dated August 14, 2009.