Modifying Fiscal Incentives to BOI-Registered Enterprises

August 7, 1985

EXECUTIVE ORDER NO. 1045

MODIFYING FISCAL INCENTIVES TO BOI-REGISTERED ENTERPRISES

WHEREAS, under Article 57 of Presidential Decree No. 1789, otherwise known as the Omnibus Investment Code, the President may, upon recommendation of the Board of Investments, rationalize the incentive schemes provided therein by modifying existing ones, where such modification is required in the interest of national development;

WHEREAS, some of the incentive schemes provided under the Omnibus Investment Code, as amended by Batas Pambansa Blg. 391, intended to compensate for market imperfections, have been perceived by some countries as containing subsidy elements which may be countervailable;

WHEREAS, for the optimal use of fiscal incentives by manufacturers, there is a need to realign and restructure such incentives.

NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Philippines, by virtue of the powers vested in me by the Constitution, do hereby order and ordain:

SECTION 1. Effective January 1, 1987, the incentive to export producers of tax and duty exemption on imported capital equipment and tax credit on domestic capital equipment provided for under Articles 48 (a) and 48 (b) of Presidential Decree No. 1789 (Omnibus Investment Code), as amended by Batas Pambansa Blg. 391, shall be subject to repayment as provided in Articles 45 (a) and 45 (b) of the said Code applicable to registered domestic producers, by deducting the amount of exemptions or credits from the amount of tax credits available to the registered export producer provided that in the event the tax credits on net value earned and on net local content computed on a yearly basis for 5 years from the date of commercial operation are not sufficient to pay yearly 20% of the taxes and duties on equipment and spare parts, the export producer shall be required to pay the difference for that particular year. This obligation may be deferred to the succeeding year only subject to the payment of interest. DEIHSa

SECTION 2. Effective January 1, 1987, the tax credit on net local content provided under Article 48 (d) of the Omnibus Investment Code, as amended, shall also be extended to registered domestic producers under the same conditions therein stated.

SECTION 3. Effective January 1, 1987, the provision of Article 49 (d) of the Omnibus Investment Code, as amended, granting to export traders the right to deduct from taxable income an amount equivalent to 20% of its export sales, is hereby repealed.

SECTION 4. The provisions of the preceding sections notwithstanding, enterprises approved/registered with the Board of Investments prior to April 1, 1985 shall not be affected by the above modifications. Enterprises approved for registration by the Board of Investments after April 1, 1985 and in operation before April 1, 1987 shall continue to enjoy the provision of Articles 48 (a), 48 (b), 48A (a), 48 (d) and 49 (d) of the Omnibus Investment Code, as amended, up to April 1, 1990.

SECTION 5. BOI-registered enterprises, whether domestic or export producers, located in the Phividec Industrial Estate shall not be subject to local taxes as provided in Section 9 of Presidential Decree No. 538.

SECTION 6. Enterprises registered with the Board of Investments as domestic or export producers under Book I of the Omnibus Investment Code are recognized as manufacturers and therefore not subject to contractor's tax for their registered operations.

SECTION 7. All other laws, decrees, executive orders, administrative orders, rules and regulations, or parts thereof which are inconsistent with the provisions of this Order are hereby repealed, amended or modified accordingly.

SECTION 8. Unless otherwise provided herein, this Executive Order shall take effect immediately.

DONE in the City of Manila, this 7th day of August, in the year of Our Lord, nineteen hundred and eighty-five. cDTSHE