Rules and Regulations Issued by the Board of Investments Implementing Republic Act No. 8502 Otherwise Known as the Jewelry Industry Development Act of 1998

August 31, 1998 REVENUE MEMORANDUM CIRCULAR NO. 41-98 SUBJECT : Rules and Regulations Issued by the Board of Investments Implementing Republic Act No. 8502 Otherwise Known as the Jewelry Industry Development Act of 1998 TO : All Internal Revenue Officers and Others Concerned For the information and guidance of all concerned, attached herewith is a copy of the subject rules and regulations. All concerned are requested to give these rules and regulations a wide publicity as possible. (SGD.) BEETHOVEN L. RUALO Commissioner of Internal Revenue ATTACHMENT RULES AND REGULATIONS IMPLEMENTING R.A. NO. 8502, OTHERWISE KNOWN AS THE JEWELRY INDUSTRY DEVELOPMENT ACT OF 1998 RULE I BASIC GUIDELINES SEC. 1. Statement of Policies . The State recognizes that the Jewelry Industry has the potential for more employment generation, enhance efficient tax collection through the formal and integrated organization of small and medium jewelry business activities, increase their linkages with the other sectors of the economy, and to increase the country's declared foreign exchange earnings through the encouragement of exports. The State declared its policy to support, promote and encourage the growth and development of the predominantly small and medium scale jewelry industry. Toward this end the State shall encourage the development of the Jewelry industry by: (a) promoting and encouraging local jewelers to join the formal sector by making the jewelry industry sector a partner in the task of building up the predominantly small and medium scale enterprises through the establishment of adequate support structure, and creation of a business environment conducive to the legalization, viability, and development of the jewelry sector; (b) adopting appropriate grant of incentives and development programs that are necessary for the acceleration and growth of the jewelry industry; (c) formulating appropriate training schemes that are aimed at upgrading the skills and craftsmanship of Filipino jewelry workers towards world class standards; and (d) institutionalizing the promotion and participation of associations of the jewelry industry and cooperatives engaged in the jewelry industry through formulation of appropriate development plans for sustained Filipino skills and craftsmanship. SEC. 2. Designation of Agency . The Board of Investments (BOI) is hereby designated by the Department of Trade and Industry (DTI) to assist the latter in the monitoring, overseeing and supervision, related to the implementation of Republic Act No. 8502 and its Rules and Regulations. SEC. 3. Construction . These Rules shall be liberally construed in order to promote its objectives and to ensure a speedy process of Accreditation. RULE II DEFINITION OF TERMS SEC. 1. For the purposes of Republic Act 8502 and these rules and regulations the terms used herein shall be construed to have the following meaning: (a) " Act " means the Jewelry Industry Development Act of 1998 (RA 8502). (b) " Board " means the Board of Investments (BOI). (c) " Accreditation " means the determination of qualifications prescribed by the Board for eligibility to the assistance, counseling and other incentives provided under the Act. (d) " Certificate of Accreditation " shall refer to the evidence issued by the Board attesting to the compliance of an applicant with qualifications for accreditation. (e) " Jewelry Enterprise " means an enterprise engaged in any aspect involved in the manufacture of jewelry and in particular though not exclusively: a) in the manufacture of fine jewelry; b) in the manufacture of imitation jewelry; c) cutting and polishing, forming of gemstones or in producing imitations thereof; d) pearl farming, pearl culturing, and in the production of imitation pearls; e) refining and/or forming of precious metals and/or imitations of precious metals; f) manufacture of articles made of precious metals utilizing goldsmithing and/or silversmithing techniques and g) the manufacture and/or processing of other raw materials and parts used in the manufacture of jewelry; and h) activities in support of jewelry enterprise, such as; electroplating gemstone appraisal and certification; assaying and refining and import consolidator. (f) " Qualified Enterprise " means any natural person who has organized a sole proprietorship, and/or juridical entity organized and existing under Philippine laws. (g) " Fine jewelry " means a) articles of personal adornment made of precious metals, stones, pearls or combinations thereof; (for example: rings, bracelets, necklaces, brooches, earrings, watch-chains, fobs, pendants, tie pins, cuff links, combs, tiaras, dress-studs, religious or other medals or insignia). b) articles made of precious metals, with or without stones for personal use of a kind normally carried in the pocket, handbags or (in the person; for example: cigarette cases, powder boxes, chain purses, cachou boxes). (h) " Imitation jewelry " means articles falling either under g(a) or g(b) in the preceding paragraph made of base metals and/or materials other than precious metals of imitations of gemstones, of natural materials; and/or their combination thereof. (i) " Precious metals " means precious metals which include gold, silver, platinum, palladium, rhodium, ruthenium, iridium, and osmium. This includes alloys of precious metals, solders, and plating chemicals such as rhodium and palladium plating solutions and potassium gold cyanide (minimum 68.3% gold) and potassium silver cyanide (approx. over 68% silver) and silver cyanide (over 54% silver) in salt solution. (j) " Imitations of precious metals " means non-precious metals electroplated to simulate precious metals. (k) " Base metals " means iron and steel, copper, nickel, aluminum, lead, zinc, tin and their articles thereof, and other base metals and their articles as defined in Section XV of the Tariff and Customs Code of the Philippines, as amended. (l) " Gemstone " means diamond, ruby, emerald, sapphire, opal, amethyst, beryl, topaz, garnet and all other gems and stones that are used in jewelry making. (m) " Imitations of gemstones " means any man-made reproduction, copy, imitation, likeness, and semblance of any of the aforementioned stones processed manufactured or done in any method or procedure. (n) " Other Raw Materials Used in Jewelry Making " means: a) Raw Materials, supplies and other materials such as, but not limited to: clasps, chains in spools, wires, sheets, findings, settings, rubber molds, cleaning solution, soldering pads binding wires, points wheel, and sharpening stones; b) Consumable, such as, but not limited to: injection waxes, investment powders, fluxes, solders, enamels, electroplating materials, polishing compound. (o) " Assaying " means the method of examining the mineral, ore, or alloy differing from a complete analysis in that it determines only certain ingredients in the substance examined whereas the analysis determines everything it contains. cdll (p) " Refining " means methods of purifying precious metals from its impurities up to 99.99% purity. (q) " Gemstone appraisal and certification " means examination of gemstone to determine quality (i.e. cut, clarity, color and carat) and estimated market value. (r) " Cutting " means the process of shaping gemstones on revolving diamond charged or other abrasive grinding wheels. (s) " Forming " means the generic term for the processes used in shaping precious metals and imitations thereof such as bending, dapping, chasing, repousse, sinking, hammering, with or without stakes, using stamps and dies, forging, fusing and engraving. (t) " Polishing " means the process of smoothening and shining the surface of metals for jewelry making or gemstones for lapidary. (u) " Electroplating " means the process of depositing a layer of metal or to a conductive surface through the use of electricity. (v) " Import Consolidator " means a non-stock, non-profit organization or association of jewelry enterprises, duly registered by the SEC, authorized to import in behalf of its members. (w) " Date of Official Acceptance " means date stamped on the application and recorded in the Record of Application Book of the Board. However for applications for Accreditation filed with the BOI extension or de-facto offices in the provinces the date of official acceptance in relation to the ten (10) working day period for automatic approval, shall be the date the application is recorded in the Record of Application Book of the Board until such time that the extension and de-facto offices are fully equipped to accept and process the applications. (x) " Record of Application Book Under RA 8502 " means the application for accreditation book of the Board especially evolved for purposes of the Act, wherein the name of the applicant shall be recorded and the corresponding dates of the official acceptance of the application are so consecutively entered. This is to be differentiated from the Accreditation Book which records the names of all accredited jewelry enterprises and their corresponding dates of accreditation and renewal of accreditation. (y) " Date of Accreditation " means the date when the Certificate of Accreditation is issued after the completion of the Board's evaluation of the applicant for accreditation, unless an earlier date is indicated as the effective accreditation date. (z) " Micro , Small , Medium and Large Scale Jewelry Enterprises " means an enterprise as defined under letter (e), whether single proprietorship, cooperative, partnership or corporation whose total assets, inclusive of those arising from loans but exclusive of the land on which the particular business entity's office, plant and equipment are situated, must have value falling under the following categories: a) micro jewelry enterprise : less than P1,500,001 b) small scale jewelry enterprise : P1,500,001 - P15,000,000 c) medium scale jewelry enterprise : P15,000,001 - P60,000,000 d) large scale jewelry enterprise : more than P60,000,000 RULE III QUALIFICATIONS OF APPLICANT SEC. 1. Specific Qualifications of Applicant . To be entitled to accreditation under the Act and these Rules, an applicant must show all the qualifications provided herein: (a) That it is a single proprietorship, cooperative, corporation, partnership, or organization established and duly authorized to do business under Philippine laws. (b) That in case the applicant is a natural person, the latter has the legal capacity or power to do all acts with legal effect; (c) That it is engaged or proposing to engage in any of the activities of a Jewelry enterprise as defined in Rule II of these Rules; (d) That in case the applicant is a corporation, the area of activity in which it is engaged or proposing to engage is within its corporate powers, as indicated in its Articles of Incorporation; (e) That it has secured the necessary mayor's permit or municipal license, the appropriate TIN and VAT registration; and, (f) That it is endorsed by a duly recognized jewelry association, accredited by the Board, wherein it is a member of good standing. SEC. 2. Renewal of Accreditation ; Documents to be Submitted . To be entitled to a renewal of the Certificate of Accreditation under the Act and these Rules, an applicant must submit all the following: (a) Proof of compliance with the Reportorial Requirements under Rule VIII of these Rules; dctai (b) Changes if any, in the corporate or organizational structure of the qualified jewelry enterprise; (c) An endorsement by a duly recognized jewelry association, accredited by the Board wherein it is a member in good standing; (d) Mayor's permit or municipal license and appropriate TIN and VAT registration. RULE IV FILING OF APPLICATION FOR ACCREDITATION SEC. 1. Where to File . Application for accreditation may be filed with the Board of Investments or with its extension offices in the provinces. In the absence of the latter, application may be filed with the Regional Offices of the Department of Trade and Industry. All applications received by BOI extension offices and DTI Regional offices shall be forwarded to the BOI within 48 hours from receipt thereof and they are considered officially accepted upon their being recorded in the BOI Record of Application Book under RA 8502. The firm applying for accreditation shall shoulder the mailing or delivery charges covering transmittal of their application from the DTI Regional Office to BOI. Accreditation under this Act shall not be construed to mean that jewelry enterprises therein listed are automatically registered with BOI under Executive Order (EO) 226, otherwise known as the Omnibus Investments Code. SEC. 2. Form . All applications shall be made upon forms prescribed by the Board, duly accomplished in two (2) copies and must be sworn to before a notary public. SEC. 3. Official Acceptance of Application . Applications for accreditation shall be deemed officially accepted upon submission of all pertinent documents and information required in the application form and upon payment of all required fees. However whenever appropriate, the Board may require submission of additional supporting documents. SEC. 4. Annual Accreditation . For purposes of continued availment of incentives all jewelry enterprises must apply for accreditation with the Board forty-five (45) days before the date of expiration as indicated in their Certificate of Accreditation. RULE V BOARD ACTION SEC. 1. Board Action , Notice to the Applicant . The Board shall act within ten (10) working days after official acceptance of the application. Action on every application for Accreditation under the Act and these Rules, as well as the terms and conditions of accreditation shall be communicated in writing to the applicant. Where an application for accreditation is not acted upon by the Board within the said period of time, the same shall be considered automatically approved without prejudice to the Board imposing the usual normal conditions for the issuance of the Certificate of Accreditation as provided in the Act and these Rules. prcd SEC. 2. Certificate of Accreditation . Upon compliance with all the required accreditation requirements and payments of an accreditation fee, the Certificate of Accreditation shall be issued, unless withheld for a cause attributable to the applicant. The date appearing on the Certificate shall be the date of approval of the Accreditation, and which shall be the reckoning date for purposes of the annual application for Accreditation and availment of incentives herein provided. RULE VI DEVELOPMENT INCENTIVES TO ACCREDITED ENTERPRISES SEC. 1. Development Incentives . The following incentives shall be available to any accredited jewelry enterprise: (a) Entitlement to a zero (0) duty on imported raw materials which include precious metals, loose gems, gemstones, jewelry parts, accessories, and supplies for its use as specifically mentioned in Chapter 5 of Section 1, Chapter 12 of Section II, Chapters 25, 26, & 27 of Section V, Chapters 28, 34, & 38 of Section VI, Chapter 70 of Section XIII, Chapter 71 of Section XIV, Chapter 83 of Section XV, and Chapter 96 of Section XX of the Tariff and Customs Code, as amended. Other raw materials likewise entitled to zero (0) duty forming part of and/or generic to those listed above like gemstones are enumerated in Annex "A" as hereto attached and made an integral part hereof. Subsequent amendments to this list shall be subject to the same administrative process followed in the preparation of the first list. (b) Exemption from the imposition of excise tax on all goods commonly or commercially known as jewelry, whether real or imitation pearls, precious and semi-precious stones and imitations thereof, all goods made of, or ornamented, mounted or fitted with precious metals or imitations thereof, as specifically mentioned in Section 150 (a) of the National Internal Revenue Code of the Philippines, as amended. (c) Entitlement to zero (0) duty on imported capital equipment, including spare parts and tools thereof falling within Chapter 69 of Section XIII, Chapter 62 of Section XV, Chapters 84 & 85 of Section XVI and Chapter 90 of Section XVIII of the Tariff and Customs Code as amended are enumerated in Annex "B" hereto attached. Subsequent amendments to this list shall be subject to the same administrative process followed in the preparation of the first list. (d) Entitlement to a deduction from taxable income equivalent to one hundred fifty percent (150%) of expenses incurred in training schemes provided that the following conditions are complied with: a) it must be approved by the appropriate government agency like Technical Education and Skills Development Authority (TESDA) for post secondary non-degree programs and/or Commission on Higher Education (CHED) for degree programs; b) the employer must pay the trainee undergoing the program at least the minimum wage provided by law or regulations, or his present salary whichever is applicable irrespective of the duration of the training program; c) the deduction shall be made during the financial year the expenses were incurred. (e) Entitlement to gold and silver sales by the Bangko Sentral ng Pilipinas under minimal margins. (f) Authority to buy gold and silver directly from other sources without any specific authority from the Bangko Sentral ng Pilipinas. However, this shall not include sale of gold and silver from small scale miners, which, as mandated by RA 7076, People's Small Scale Mining Act of 1991, are required to be sold to the Bangko Sentral ng Pilipinas. (g) Inclusion of locally manufactured jewelry products in the government's tourist duty free shops together with promotion, advertisements and sale of the jewelry products. (h) An Accredited Jewelry Enterprise availing of incentives provided under the Act and these Rules shall still be eligible to incentives provided for by other special laws such as: a) Republic Act No. 7844 (Export Development Act of 1994); b) Republic Act No. 7916 (Special Economic Zone Act of 1995); c) Republic Act No. 7227 (Bases Conversion and Development Authority); d) Executive Order No. 226 (BOI Omnibus Investment Code); among others; Provided, that, the Jewelry Enterprise shall register under the aforestated laws that the activity is export-oriented and there is no double availment of the same incentives. The availment of incentives provided under Sec. 1-(a), (b), (c) and (d) hereof shall be in accordance with the guidelines prepared by the Department of Finance, Bureau of Customs and Bureau of Internal Revenue. SEC. 2. Application for Availment of Incentives . All applications for availment of incentives under the Act shall be filed by the Accredited Jewelry Enterprise with the appropriate government agencies such as the Department of Finance, Bureau of Customs and Bureau of Internal Revenue, which shall process said applications within five (5) working days from the date of filing unless otherwise specified in their respective internal procedures. SEC. 3. Registration with Other Government Investment Incentives Agencies . Other Government Agencies granting incentives pursuant to Section 3 (h) of the Act shall upon filing an application for registration issue an approval thereof and allow the accredited jewelry enterprises the incentives therefor five (5) working days from the date of filing unless otherwise specified in their respective internal procedures. RULE VII ACTIVITIES IN SUPPORT OF JEWELRY MANUFACTURING SEC. 1. Support Activities . Subject to the provisions of Section I Rule II of these rules following are the activities recognized in support of Jewelry Manufacturing: (a) Electroplating; (b) Assaying and Refining; (c) Gemstone Appraisal and Certification; and (d) Import Consolidator SEC. 2. Assaying . The accredited firm/facility shall accreditation from and shall adopt the standards set by the Bureau of Product Standards (BPS). SEC. 3. Gemstone Appraisal and Certification . Gemstone Appraisal and Certification shall be based on the standards and accreditation to be set by the Bureau of Product Standards (BPS). SEC. 4. Import Consolidator . The Import Consolidator shall secure accreditation from the Board subject to the guidelines to be set by the Board. RULE VIII REPORTORIAL REQUIREMENTS SEC. 1. Submission of Reports . Every accredited enterprise shall submit to the Board the following reports and/or documents within the time herein prescribed of within a reasonable period as may be determined by the Board, to wit: (a) Annual Report of Operation January 31 of each year; (b) Income Tax Returns thirty (30) calendar days from the filing thereof; (c) Audited Financial Statements, viz. 1) profit and loss statement, and 2) balance sheets thirty (30) calendar days from date of filing with the Bureau of Internal Revenue of the annual income tax return for the preceding calendar/fiscal year; (d) However, for the first two (2) years of accreditation of the Jewelry Enterprise, the submission of a Certified True and Correct Financial Statement in lieu of the Audited Financial Statement may be sufficient. (e) Proof of remittance of withholding taxes, payments of VAT, payments of SSS contributions, and other benefits accorded to workers as mandated by existing tax, (f) Incentives availment report, and; (g) Other reports that may be required by the Board. SEC. 2. Failure to submit any of the foregoing reports shall be a ground for the imposition of fines in such amount, as may, in the discretion of the Board, be deemed appropriate consistent with the Rules and Regulations Implementing EO 226 which are applied herein in a suppletory manner, or inexcusable failure to comply with reportorial requirements shall be a ground for suspension of enjoyment of incentives or cancellation of the Certificate of Accreditation. prLL SEC. 3. The DTI/BOI shall submit an annual consolidated report to Congress of the implementation of the Act as provided under Section 6 thereof including the Jewelry Industry's performance as a whole, the incentives availment and the performance by each sector in the industry. RULE IX SYNCHRONIZED GOVERNMENT SUPPORT SEC. 1. All departments, bureaus, agencies or instrumentalities of the government are enjoined to extend the necessary assistance to Accredited Jewelry Enterprises to ensure the implementation of the Act in a synchronized manner and achieve the objectives thereof. RULE X EFFECTS OF WITHDRAWAL FROM BUSINESS OR SUSPENSION OF OPERATIONS SEC. 1. Effect of Non-implementation of Project Timetable . In case an accredited enterprise incurs a delay of six (6) months in the implementation of its project timetable, the Board shall upon due notice automatically cancel the Certificate of Accreditation, and unless otherwise reinstated by the Board the enterprise shall surrender its certificate within fifteen (15) calendar days from receipt of the notice of automatic cancellation. SEC. 2. Withdrawal from Business ; Cessation of Operations . Whenever an accredited enterprise decides to withdraw from business or suspend its operations for at least six (6) months, a written notice thereof shall be sent to the Board before the decision is implemented. Withdrawal from business operations for an indefinite period or more than six (6) months shall automatically cancel the certificate of accreditation which shall then be turned over to the Board within the period specified in Section 1 hereof. Upon such withdrawal, the enterprise shall cease to be entitled to the incentives provided under the Act and these Rules. The effect of withdrawal from business or suspension of operations in the accredited activity shall, in each particular instance, be determined by the Board taking into account the reasons therefor and the condition of the accredited enterprise. The Board may in appropriate case, require the refund of incentives in whole or in part with or without interest or penalties. RULE XI SANCTIONS SEC. 1. Grounds for Cancellation of Accreditation . Certificates of Accreditation issued under the Act and these Rules shall be CANCELED by reason of any of the following grounds: (a) Failure to maintain the qualifications of an Accredited Enterprise; (b) Violation of any provisions of the Act; (c) Violation of any provisions of these Rules and Regulations, of any of the Terms and Conditions provided in the Certificate of Accreditation or Orders issued by the Board; and (d) Violation of any law for the protection of the environment. SEC. 2. Grounds for Suspension . For the same grounds enumerated in the immediately preceding section, the Board may suspend the enjoyment of one or more incentives enjoyed by an Accredited Enterprise depending upon the gravity of the offense committed. LLpr SEC. 3. Violations of Other Laws . Acts of violation by accredited jewelry enterprises of the National Internal Revenue Code as amended, the Tariff and Customs Code as amended, the Labor Code and such other applicable laws shall be subject to the penalties provided under said laws. RULE XII APPEAL SEC. 1. General Rules . All actions by the Board under the Act and these Rules shall become final and executory after the expiration of the period within which to appeal, which shall be fifteen (15) days counted from the date of receipt of the Board decision, and no appeal has been taken therefor, no appeal therefrom by any party adversely affected thereby shall stay any or all of such actions taken, except in cases of cancellation of Accreditation initiated either by the Board or by a private party, in which case, it shall be governed by the Rules and Regulations on Hearing of Cases for Cancellation for Violations promulgated by the Board on 24 March 1981 governing enterprises registered under EO 226, the Omnibus Investment Code, as amended. All decisions of the Board under the Act and these Rules may be appealed to the Office of the President within fifteen (15) days from receipt of the decision otherwise the same shall become final and executory. Where an appeal has been perfected such decision shall become final and executory ninety (90) days after the perfection of the appeal unless reversed. SEC. 2. Judicial Review . The aggrieved party may seek a review of the Boards decision by filing an appropriate petition with the Court of Appeals. RULE XIII FEES SEC. 1. The Board shall collect Accreditation fee based on the following categories: FEE (a) Micro Jewelry Enterprises : less than P1,500,001 : P1,000 (b) Small Scale Jewelry Enterprises : P1,500,001 - P15,000,000 : P2,000 (c) Medium Scale Jewelry Enterprises : P15,000,001 - P60,000,000 : P3,000 (d) Large Scale Jewelry Enterprises : P60,000,001 - and above : P4,000 SEC. 2. The provisions on the Schedule of Fines and Penalties setforth in the Rules and Regulations Implementing EO 226 as amended shall herein apply in a suppletory manner. RULE XIV REPEALING CLAUSE SEC. 1. Repealing Clause . All administrative orders, rules and regulations, or parts thereof which are inconsistent with the provisions of these Rules and Regulations are hereby repealed, amended, or modified accordingly. RULE XV EFFECTIVITY SEC. 1. These Implementing Rules and Regulations shall take effect fifteen (15) days following their publication in a newspaper of general circulation. llcd Approved: June 11, 1998 (SGD.) C.B. BAUTISTA Secretary Department of Trade and Industry