TITLE XIII [234]
TAX INCENTIVES
CHAPTER I
GENERAL PROVISIONS ON TAX INCENTIVES
SEC. 291. Scope and Coverage. - This Title shall cover all existing Investment Promotion Agencies as defined in this Code or related laws unless otherwise specifically exempted from the coverage of this Code.
The Investment Promotion Agencies shall maintain their functions and powers as provided under the special laws governing them except to the extent modified by the provisions of this Code: Notwithstanding the provisions of this Section, the Department of Finance, the Bureau of Internal Revenue, and the Bureau of Customs shall retain their respective mandates, powers and functions as provided for under this Act and related laws.
SEC. 292. Extent of Authority to Grant Tax Incentives. - The Fiscal Incentives Review Board or the Investment Promotion Agency, shall grant the appropriate tax incentives provided in this Title to RBEs only to the extent of their approved registered project or activity under the Strategic Investment Priority Plan (SIPP), taking into consideration the infusion of investment capital, generation of direct local employment which takes into account Republic Act No. 11962, otherwise known as the 'Trabaho Para sa Bayan Act,' and other standard and project-specific performance metrics of the registered project or activity that may be imposed by the Fiscal Incentives Review Board or the concerned Investment Promotion Agency.[261]
SEC. 293. Definitions. - When used in this Title:
(A) Capital equipment refers to machinery, equipment, major components thereof, tools, devices, applications or apparatus, which are directly attributable to the registered project or activity of the registered business enterprise;[261]
(B) Certificate of authority to import refers to the document issued by the Investment Promotion Agency as proof of entitlement to exemption from value-added tax and/or duty-free importation which shall contain a list of capital equipment, raw materials, spare parts, or accessories to be imported that are directly attributable to the production of goods and services, including goods used for administrative purposes;[260]
(C) Certificate of registration refers to the document evidencing registration with an Investment Promotion Agency and entitlement to tax incentives: Provided, That each registered project or activity of a registered business enterprise should be supported by a separate certificate of registration;[260]
(D) Directly attributable refers to goods and services that are incidental to and reasonably necessary for the registered project or activity of the registered business enterprise, including janitorial, security, financial, consultancy, marketing and promotion services, and services rendered for administrative operations such as human resources, legal, and accounting: Provided, That the determination of what is 'directly attributable' to the registered project or activity of the registered business enterprise shall be made by the relevant Investment Promotion Agency;[260]
(E) Direct local employment refers to the full and decent employment of Filipinos by registered business enterprises under an employer-employee relationship to perform functions that are directly related to the production of goods or performance of services under the registered project or activity;
(F) Domestic input refers to purchases of locally manufactured goods or locally produced raw materials or domestically outsourced services known as services embedded in manufacturing that are used directly in the production of goods under the registered project or activity. In the case of locally manufactured goods, fifty percent (50%) of the value-added of the said good should likewise be locally produced or manufactured;
(G) Domestic market enterprise refers to any enterprise registered with the Investment Promotion Agency other than export enterprise;
(H) Export enterprise refers to any individual, partnership, corporation, Philippine branch of a foreign corporation, or other entity organized and existing under Philippine laws and registered with the Investment Promotion Agency to engage in manufacturing, assembling or processing activity, and services such as information technology (IT) activities and business process outsourcing (BPO), and resulting in the direct exportation, and/or sale of its manufactured, assembled or processed product or IT/BPO services to another registered export enterprise that will form part of the final export product or export service of the latter, of at least seventy percent (70%) of its total production or output;
(I) Freeport zones refer to isolated and policed areas adjacent to a port of entry, which shall be operated and managed as a separate customs territory for purposes of ensuring free flow or movement of goods between registered business enterprises, except those expressly prohibited by law, within, into, and exported out of the freeport zone where imported goods may be unloaded for immediate transshipment or stored, repacked, sorted, mixed, or otherwise manipulated subject to the provisions of Sections 294(D) and (E) and 295(C) and (D): Provided, That a freeport shall have a permanent customs control or customs office at its perimeter;[261]
(J) High-value domestic market enterprises refer to registered domestic market enterprises with an investment capital exceeding Fifteen billion pesos (Php15,000,000,000) and are engaged in sectors considered import-substituting, or with export sales in the immediately preceding year of at least One hundred million US dollars (USD100,000,000) or its equivalent in an acceptable foreign currency: Provided, That the threshold specified herein may be increased by the Fiscal Incentives Review Board;[260]
(K) Investment capital refers to the value of investment indicated in Philippine currency, that shall be used to carry out a registered project or activity such as pre-operating expenses, cost of land and land improvements, buildings, leasehold improvements, working capital, machinery and equipment, inventory, and other current and non-current assets;[260]
(L) Investment Promotion Agencies refer to refer to government entities created by law, executive order, decree, or other issuances, in charge of promoting investments, granting and administering tax and non-tax incentives, and overseeing the operations of the different economic zones and freeports in accordance with their respective special laws. These include the Board of Investments (BOI), Bangsamoro Board of Investments (BBOI), Bangsamoro Economic Zone Authority (BEZA), Philippine Economic Zone Authority (PEZA), Bases Conversion and Development Authority (BCDA), Subic Bay Metropolitan Authority (SBMA), Clark Development Corporation (CDC), John Hay Management Corporation (JHMC), Poro Point Management Corporation (PPMC), Cagayan Special Economic Zone Authority (CEZA), Zamboanga City Special Economic Zone and Freeport Authority (ZCSEZA), PHIVIDEC Industrial Authority (PIA), Aurora Pacific Economic Zone Authority (APECO), Authority of the Freeport Area of Bataan (AFAB), Tourism Infrastructure and Enterprise Zone Authority (TIEZA), Bulacan Special Economic Zone and Freeport Authority (BEZA), and all other similar existing authorities or those that may be created by law unless otherwise specifically exempted from the coverage of this Code;[261]
(M) Metropolitan areas refer to Metro Cebu and Metro Davao or those local government units which are later qualified or grouped as such by the National Economic and Development Authority or through laws or executive issuances;
(N) Net book value refers to historical cost less accumulated depreciation, as reflected in the books of account or financial statements of the registered business enterprise, and determined in accordance with accepted accounting standards;[260]
(O) Other government agencies administering tax incentives refer to government agencies other than Investment Promotion Agencies which register or administer tax incentives of any kind to any specific entities and/or class of persons pursuant to any law;
(P) Other registered entities refer to any individual, partnership, organization, corporation, Philippine branch of a foreign corporation, or other entity incorporated and/or organized and existing under Philippine laws, and registered with other government agencies administering tax incentives;
(Q) Qualified capital expenditure refers to purchases of capital goods with a useful life of more than one (1) year acquired for the entity's production of goods and services to be directly used in the project or activity of the registered business enterprise;
(R) Registered business enterprise (RBE) refers to any individual, partnership, corporation, Philippine branch of a foreign corporation, or other entity organized and existing under Philippine laws and registered with an Investment Promotion Agency excluding service enterprises such as those engaged in customs brokerage, trucking or forwarding services, janitorial services, security services, insurance, banking, and other financial services, consumers' cooperatives, credit unions, consultancy services, retail enterprises, restaurants, or such other similar services, as may be determined by the Fiscal Incentives Review Board, irrespective of location, whether inside or outside the zones, duly accredited or licensed by any of the Investment Promotion Agencies and whose income delivered within the economic zones shall be subject to taxes under the National Internal Revenue Code of 1997, as amended;
(S) Research and development refers to experimental or other related projects or activities:
(1) Whose outcome cannot be known or determined in advance on the basis of current knowledge, information or experience, but can only be determined by applying a systematic progression of work:
(i) Based on principles of established science; and
(ii) Proceeds from hypothesis to experiment, observation and evaluation, and leads to logical conclusions.
(2) That are conducted for the purpose of generating new knowledge, including new knowledge in the form of new or improved materials, products, devices, processes or services;
(T) Sophisticated refers to the state when a product or service requires a high level of technology, human capital, competencies or know-how, and infrastructure to be produced or offered;
(U) Sophistication refers to the level of technology, human capital, competencies or know-how, and infrastructure required for a product or service to be offered by an economy like that of the Philippines;
(V) Source document refers to input materials and documents reasonably needed by information technology (IT) and IT-enabled industries such as books, directories, magazines, newspapers, brochures, pamphlets, medical records or files, legal records or files, instruction materials, and drawings, blueprints, or outlines;
(W) Special economic zone or ecozone refers to a selected area which shall be operated and managed as a separate customs territory that is highly developed or has the potential to be developed into an agro-industrial, industrial, information technology, or tourist/recreational area, whose metes and bounds are fixed or delimited by presidential proclamations and is within a specific geographical area which includes industrial estates (IEs), export processing zones (EPZs), ICT parks and centers, and free trade zones: Provided, That for the ecozone to qualify as a separate customs territory, an ecozone shall have a permanent customs control or customs office at its perimeter: Provided, however, That areas where mining extraction is undertaken shall not be declared as an ecozone: Provided, further, That vertical economic zones, such as, but not limited to, buildings, selected floors within buildings, and selected areas on a floor, need to comply with the minimum contiguous land area as determined by the Fiscal Incentives Review Board;[261]
(X) Technical obsolescence refers to the state of an asset when its design or specification no longer fulfills the function for which it was originally designed and/or the machinery, equipment, spare parts and/or materials have diminished in value as caused by changes in technology and new inventions, rendering it less desirable in the industry, including a decline in value due to the availability of improved, more cost-effective alternatives, or due to the availability of more advanced technology that allows for more efficiency such as earlier replacement of information technology assets, as may be verified and approved by the Investment Promotion Agency;[260] and
(Y) Training refers to courses, curricula, certifications or modules provided to Filipino employees that are directly related to the production of goods or performance of services under the registered project or activity and that are of a technical nature, which shall develop or improve the specific skills or practical knowledge of the employee especially in the mechanical, industrial art, scientific field or practical science of a particular position or job function in the registered project or activity, or in preparation for enhancing the value chain.
CHAPTER II
TAX AND DUTY INCENTIVES
SEC. 294. Incentives. - Subject to the conditions and period of availment in Sections 295, 296, and 296-A, respectively, the following types of tax incentives may be granted to registered projects or activities:
(A) Income Tax Holiday (ITH). - For all RBEs, exemption from income tax on registered project or activity imposed under this Code;
(B) Special Corporate Income Tax (SCIT) Rate - For export enterprise, [236] a tax rate equivalent to five percent (5%) based on the gross income earned, in lieu of all national and local taxes and local fees and charges.[237][261]
The period of availment of the Special Corporate Income Tax shall be subject to the conditions set under paragraphs (A) and (B) of Section 296 of this Act:
Provided, That, if applicable, the shares of the local government units and the Investment Promotion Agencies under the special laws governing the latter shall be observed and shall not result in the diminution of their respective shares.[238]
(C) Enhanced Deductions Regime (EDR).[261] - For export enterprise and domestic market enterprise,[239] the following may be allowed as deductions:
(1) Depreciation allowance of the assets acquired for the entity's production of goods and services (qualified capital expenditure) - additional ten percent (10%) for buildings; and additional twenty percent (20%) for machineries and equipment;
(2) Fifty percent (50%) additional deduction on the labor expense incurred in the taxable year;
(3) One hundred percent (100%) additional deduction on research and development expense incurred in the taxable year;
(4) One hundred percent (100%) additional deduction on training expense incurred in the taxable year;
(5) Fifty percent (50%) additional deduction on domestic input expense incurred in the taxable year;
(6) One hundred percent (100%) additional deduction on power expense incurred in the taxable year;
(7) Deduction for reinvestment allowance to manufacturing and tourism industries. - When a manufacturing or tourism RBE reinvests its undistributed profit or surplus in manufacturing or tourism projects or activities, respectively, that are listed in the SIPP, no more than fifty percent (50%) of the amount reinvested shall be allowed as a deduction from its taxable income within a period of five (5) years from the time of such reinvestment;
(8) Fifty percent (50%) additional deduction on expenses relating to exhibitions, trade missions, or trade fairs; and
(9) Enhanced Net Operating Loss Carry-Over (NOLCO). - The net operating loss of the registered project or activity during the first three (3) years from the start of commercial operation, which had not been previously offset as deduction from gross income, may be carried over as deduction from gross income within the next five (5) consecutive taxable years immediately following the last year of the ITH entitlement period of the project.
(D) Duty exemption on importation of capital equipment, raw materials, spare parts, or accessories, including goods used for administrative purposes, of the registered project or activity;
(E) Value-Added Tax (VAT) exemption on importation and VAT zero-rating on local purchases; and
(F) RBE Local Tax. - The concerned local government unit may, through an ordinance issued by the concerned Sanggunian, impose an RBE local tax at the rate of not more than two percent (2%) of an RBE's gross income, as defined under Section 27(E)(4), during the ITH and EDR, as provided under Sections 294(A) and (C) of this Code, respectively, which shall be in lieu of all local taxes and local fees and charges imposed by the local government unit under Republic Act No. 7160, otherwise known as the "Local Government Code of 1991," as amended: Provided, That RBE local tax shall not be imposed on RBEs under SCIT.
(Amendments to Certain Sections and Adding New Sections to the NIRC of 1997, Republic Act No. 12066, [November 8, 2024])
(7) Deduction for reinvestment allowance to manufacturing and tourism industries. - When a manufacturing or tourism RBE reinvests its undistributed profit or surplus in manufacturing or tourism projects or activities, respectively, that are listed in the SIPP, no more than fifty percent (50%) of the amount reinvested shall be allowed as a deduction from its taxable income within a period of five (5) years from the time of such reinvestment;[261]
(8) Fifty percent (50%) additional deduction on expenses relating to exhibitions, trade missions, or trade fairs;[260] and
(9) Enhanced Net Operating Loss Carry-Over (NOLCO). — The net operating loss of the registered project or activity during the first three (3) years from the start of commercial operation, which had not been previously offset as deduction from gross income, may be carried over as deduction from gross income within the next five (5) consecutive taxable years immediately following the last year of the ITH entitlement period of the project.[261]
(D) Duty exemption on importation of capital equipment, raw materials, spare parts, or accessories, including goods used for administrative purposes, of the registered project or activity;[261]
(E) Value-Added Tax (VAT) exemption on importation and VAT zero-rating on local purchases;[261] and
(F) RBE Local Tax. - The concerned local government unit may, through an ordinance issued by the concerned Sanggunian, impose an RBE local tax at the rate of not more than two percent (2%) of an RBE's gross income, as defined under Section 27(E)(4), during the ITH and EDR, as provided under Sections 294(A) and (C) of this Code, respectively, which shall be in lieu of all local taxes and local fees and charges imposed by the local government unit under Republic Act No. 7160, otherwise known as the "Local Government Code of 1991," as amended: Provided, That RBE local tax shall not be imposed on RBEs under SCIT.[260]
SEC. 295. Conditions of Availment. - The availment of tax incentives in the preceding section shall be governed by the following rules:
(A) Registered export enterprises may opt for one of the following:
(1) ITH, which shall be followed by SCIT or EDR; or
(2) SCIT, which shall be in lieu of all national and local taxes and local fees and charges, and may be granted immediately at the start of commercial operations; or
(3) EDR, which may be granted immediately at the start of commercial operations.
The elected incentive package shall be irrevocable for the entire duration of entitlement to such incentives under Sections 296 and 296-A of this Code: Provided, That in no case shall the EDR be granted simultaneously with the SCIT.
(B) Registered domestic market enterprises may opt for either:
(1) ITH, which shall be followed by EDR; or
(2) EDR, which may be granted immediately at the start of commercial operations.
The elected incentive package shall be irrevocable for the entire duration of entitlement to such incentives under Sections 296 and 296-A of this Code.[261]
The following conditions for the availment of each enhanced deduction shall be complied with:
(1) The depreciation allowance of the assets acquired for the entity’s production of goods and services (qualified capital expenditure) shall be allowed for assets that are directly related to the registered enterprise's production of goods and services other than administrative and other support services.
(2) The additional deduction on the labor expense shall not include salaries, wages, benefits, and other personnel costs incurred for managerial, administrative, indirect labor, and support services.
(3) The additional deduction on research and development expense shall only apply to research and development directly related to the registered project or activity of the entity and shall be limited to local expenditure incurred for salaries of Filipino employees and consumables and payments to local research and development organizations.
(4) The additional deduction on training expense shall only apply to trainings, as approved by the Investment Promotion Agencies based on the Strategic Investment Priority Plan, given to the Filipino employees engaged directly in the registered business enterprise's production of goods and services.
(5) The additional deduction on domestic input expense shall only apply to domestic input that are directly related to and actually used in the registered export project or activity of the registered business enterprise.
(6) The additional deduction on power expense shall only apply to power utilized for the registered project or activity.[261]
(7) The deduction for reinvestment allowance to manufacturing and tourism industries shall only be availed of until December 31, 2034.[261]
(8) The additional deduction on expenses relating to trade fairs, exhibitions, or trade missions shall include expenses incurred in promoting the export of goods or the provision of services to foreign markets approved by the concerned Investment Promotion Agency.[260]
The Department of Finance, in coordination with the BIR, Fiscal Incentives Review Board, and Investment Promotion Agencies, shall prescribe the terms and conditions on the grant of EDR under Section 294(C) and this Title.
(C) The duty exemption shall only apply to the importation of capital equipment, raw materials, spare parts, or accessories directly attributable to the registered project or activity of RBEs, including goods used for administrative purposes: Provided, That the following conditions are complied with:
(1) The capital equipment, raw materials, spare parts, or accessories are directly attributable to the registered project or activity of the RBE, including goods used for administrative purposes, and are not produced or manufactured domestically in sufficient quantity or of comparable quality and at reasonable prices. Prior approval of the Investment Promotion Agency must be secured for the part-time utilization of said capital equipment, raw materials, spare parts, or accessories in a non-registered project or activity to maximize usage thereof: Provided, That the RBE shall adopt a method to best allocate the same at the time of application for a certificate of authority to import, or its equivalent: Provided, further, That the proportionate taxes and duties are paid on a specific capital equipment, raw materials, spare parts, or accessories in proportion to the utilization for non-registered projects or activities. In the event that the capital equipment, raw materials, spare parts, or accessories, shall be used for non-registered project or activity of the RBE at any time within the first five (5) years from the date of importation, the RBE shall first seek prior approval of the concerned Investment Promotion Agency and pay the taxes and customs duties that were not paid upon the importation; and
(2) The approval of the Investment Promotion Agency was obtained by the RBE prior to the importation of such capital equipment, raw materials, spare parts, or accessories.
An Investment Promotion Agency may authorize the importation of capital equipment, raw materials, spare parts, or accessories pending issuance of the certificate of registration, subject to the posting of a performance bond or bank guarantee equivalent to duties and taxes waived on such importations and other conditions as may be determined by the concerned Investment Promotion Agency and the BOC.
No taxes and duties shall be imposed on subsequent sale, transfer, or disposition of the capital equipment, raw materials, spare parts, or accessories, which were granted tax and customs duty exemption hereunder within the first five (5) years from date of importation. The approval of the Investment Promotion Agency must be secured before the sale, transfer, or disposition of the capital equipment, raw materials, spare parts, or accessories, which were granted tax and customs duty exemption hereunder, and shall be allowed only under any of the following circumstances:
(a) If made to another enterprise availing of customs duty exemption on imported capital equipment, raw materials, spare parts, or accessories;
(b) Exportation of capital equipment, raw materials, spare parts, accessories, source documents, or goods required for pollution abatement and control; or
(c) If donated to the Government of the Philippines or to any of its agencies or political subdivisions, including fully-owned government corporations, TESDA, state universities and colleges (SUCs), or DepEd and CHED-accredited schools: Provided, That the donation shall be exempt from import duties and taxes, including donor's tax.
In case of subsequent sale, transfer, or disposition of tax and duty-free capital equipment, raw materials, spare parts, or accessories, within the first five (5) years from date of importation and upon approval by the Investment Promotion Agency, there shall be taxes and duties assessed based on the net book value of the capital equipment, raw materials, spare parts, or accessories if:
(a) Made to another enterprise not availing of duty exemption on imported capital equipment, raw materials, spare parts, or accessories; or
(b) There is proven technical obsolescence of the capital equipment, raw materials, spare parts, or accessories.
Provided, That if the RBE sells, transfers, or disposes the aforementioned imported items without prior approval, the RBE and the vendee, transferee, or assignee shall be solidarily liable to pay twice the amount of the duty exemption that should have been paid during its importation: Provided, further, That the sale, transfer, or disposition of the capital equipment, raw materials, spare parts, or accessories made after five (5) years from date of importation shall require that prior notice be given by the RBE to the Investment Promotion Agency: Provided, furthermore, That even if the sale, transfer, or disposition of the capital equipment, raw materials, spare parts, or accessories was made after five (5) years from date of importation with notice to the Investment Promotion Agency, the RBE is still liable to pay the duties based on the net book value of the capital equipment, raw materials, spare parts, or accessories if it has violated any of its registration terms and conditions.[261]
(D) The VAT exemption on importation and VAT zero-rating on local purchases shall only apply to goods and services directly attributable to the registered project or activity of a registered export enterprise, or a registered high-value domestic market enterprise, including expenses incidental thereto. The project or activity registered with the Investment Promotion Agency shall be subject to the following conditions:
(1) Sale of goods or services by a VAT-registered seller to a registered export enterprise, regardless of location, shall be subject to zero percent (0%) VAT;
(2) Sale, transfer, or disposal of previously VAT-exempt imported capital equipment, raw materials, spare parts, or accessories shall be subject to the following rules:
I. If the purchaser is a registered export enterprise, regardless of location, the transaction shall be subject to zero percent (0%) VAT; and
II. If the purchaser is a registered domestic market enterprise, regardless of location, the transaction shall be subject to twelve percent (12%) VAT based on the net book value of the capital equipment, raw materials, spare parts, or accessories:
Provided, That local sales of goods and/or services by an RBE, regardless of the income tax incentives regime and location, shall be subject to twelve percent (12%) VAT, unless otherwise exempt or zero-rated under Titles IV and XIII of this Code. For this purpose, 'local sales' shall cover sales of goods and services to domestic market enterprises or non-RBEs, regardless of whether the sale occurs within the freeport or economic zones: Provided, further, That the liability to pay and remit the VAT to the government rests with the buyer of the said goods or services.
Any registered export enterprise that fails to meet the seventy percent (70%) export sales threshold in the immediately preceding year or high-value domestic market enterprise that fails to meet the export sale or investment capital requirement shall be disqualified from availing of duty exemption on importation under Section 294(D), and VAT exemption on importation and VAT zero-rating on local purchases under Section 294(E) in the immediately succeeding year.
Notwithstanding the provisions in the preceding paragraphs, sales receipts and other income derived from non-registered project or activity shall be subject to appropriate taxes imposed under this Code.[261]
(E) Notwithstanding any law to the contrary, the importation of COVID-19 vaccine shall be exempt from import duties, taxes and other fees, subject to the approval or licenses issued by the Department of Health or the Food and Drug Administration.
(F) Persons who directly import petroleum products defined under Republic Act No. 8479, otherwise known as the ‘Downstream Oil Industry Deregulation Act of 1998’, for resale in the Philippine customs territory and/or in free zones as defined under Republic Act No. 10863, otherwise known as the Customs Modernization and Tariff Act, shall not be entitled to the foregoing tax and duty incentives, and shall be subject to appropriate taxes imposed under this Code.
Any law to the contrary notwithstanding, the importation of petroleum products by any person, including RBEs, shall be subject to the payment of applicable duties and taxes as provided under Republic Act No. 10863, otherwise known as the 'Customs Modernization and Tariff Act,' and this Code, respectively, upon importation into the Philippine customs territory and/or into free zones as defined under Republic Act No. 10863: Provided, That the importation of petroleum products used in international shipping or air transport operations shall be covered by the provisions of Sections 109(U) and 135(A) of this Code.[261]
Provided, That the importer can file for claims for the refund of duties and taxes applicable under Republic Act No. 10863, otherwise known as the Customs Modernization and Tariff Act, and this Code, respectively, for direct or indirect export of petroleum products, and/or other tax-exempt sales under the Customs Modernization and Tariff Act and other special laws within the period provided therein:.
Provided, further, That the importers who subsequently export fuel, subject to the appropriate rules of the fuel marking program, may apply for a refund of duties and taxes, as applicable under Republic Act No. 10863, otherwise known as the Customs Modernization and Tariff Act, and this Code..
(G) Crude oil that is intended to be refined at a local refinery, including the volumes that are lost and not converted to petroleum products when the crude oil actually undergoes the refining process, shall be exempt from payment of applicable duties and taxes upon importation:
Provided, That applicable duties and taxes on petroleum products shall be payable only upon lifting of the petroleum products produced from the imported crude oil, subject to rules and regulations that may be prescribed by the Bureau of Customs and the Bureau of Internal Revenue, to ensure that crude oil shall not be lifted from the refinery without payment of appropriate duties and taxes.
Registered business enterprises, whose performance commitments include job generation, shall maintain their employment levels to the extent practicable, and in the case of reduced employment or when the performance commitment for job generation is not met, the registered business enterprises must submit to their respective Investment Promotion Agencies and the Fiscal Incentives Review Board their justification for the same.
(H) The RBE local tax shall be imposed on an RBE which meets and maintains the conditions for its registration, during the period of availment of the ITH and the EDR.
The tax shall be directly remitted by the RBE to the Treasurer's office of the municipality or city where the enterprise is located.
Where two (2) or more local government units cover the same enterprise, the sharing between such local government units shall be as follows:
(1) Fifty percent (50%) of revenues shall be shared equally among the local government units; and
(2) Fifty percent (50%) of revenues shall be apportioned based on the population of the local government units.
Fifty percent (50%) of the share of the municipality based on the foregoing allocation shall be remitted to the province where the said municipality is located: Provided, That cities shall retain one hundred percent (100%) of their share.
Local government units may reduce or waive the rate of tax, or their share thereof, in the case of two (2) or more local government units covering the same enterprise.
RBEs, whose performance commitments include job generation, shall maintain their employment levels to the extent practicable. In case of reduced employment or when the performance commitment for job generation is not met, the RBEs must submit to their respective Investment Promotion Agencies and the Fiscal Incentives Review Board their justifications for and plans to address the same in the succeeding year.[260]
SEC. 295-A. Registered Business Enterprises Taxpayer Service. - A separate service within the BIR is hereby created to support the end-to-end tax compliance of RBEs. The Commissioner shall prescribe the manner and place of filing returns and payment of taxes by RBEs through the said service. For ease of compliance with tax rules and regulations, simplified filing and payment processes shall be implemented for RBEs.[260]
SEC. 296. Period of Availment of Incentives for Projects or Activities Approved by the Investment Promotion Agencies. - The period of availment of incentives granted by the Investment Promotion Agencies to RBEs shall be as follows
(A) For export enterprise under the SIPP, ITH of four (4) to seven (7) years, depending on location and industry priorities as specified in this section, followed by SCIT or EDR for ten (10) years, or SCIT or EDR for a maximum period of fourteen (14) to seventeen (17) years, depending on location and industry priorities: Provided, That the application for extension of availment of incentives shall only be allowed for the same registered project or activity if such project or activity employs at least ten thousand (10,000) direct local employees and maintains the said number during its registration, even if the registered project or activity no longer complies with the conditions and qualifications set forth in the SIPP: Provided, further, That the extension of availment of incentives shall not exceed five (5) years, subject to the performance review by the Investment Promotion Agency. Notwithstanding any provision to the contrary, no ITH shall be granted to registered export enterprises that applied for extension of availment of incentives for the same project or activity.[261]
A qualified expansion project or activity registered under this Act may qualify to avail of SCIT or EDR for eight (8) years, subject to the provisions of Sections 294(B) and (C), qualifications set forth in the SIPP, and performance review by the Investment Promotion Agency: Provided, That existing registered projects or activities prior to the effectivity of Republic Act No. 11534 otherwise known as the 'Corporate Recovery and Tax Incentives for Enterprises Act', may qualify to register on or before December 31, 2024 and avail of the incentives granted under Republic Act No. 11534 for the prescribed period, subject to the criteria and conditions set forth in the SIPP. The qualified expansion project or activity may also be entitled to duty exemption on importation, VAT exemption on importation, and VAT zero-rating on local purchases subject to the provisions of Sections 294(D) and (E), respectively.[261]
(B) For domestic market enterprise under the SIPP, ITH for four (4) to seven (7) years followed by EDR for ten (10) years, or EDR for a maximum period of fourteen (14) to seventeen (17) years, depending on location and industry priorities: Provided, That the application for extension of availment of incentives shall be allowed for the same registered project or activity only if such project or activity employs at least ten thousand (10,000) direct local employees and maintains the said number during its registration, even if the registered project or activity no longer complies with the conditions and qualifications set forth in the SIPP: Provided, further, That the extension of availment of incentives shall not exceed five (5) years, subject to the performance review by the Investment Promotion Agency. Notwithstanding any provision to the contrary, no ITH shall be granted to domestic market enterprises that have applied for extension of availment of incentives for the same project or activity.[261]
A qualified expansion project or activity registered under this Act may qualify to avail of EDR for eight (8) years, subject to the provisions of Section 294(C), qualifications set forth in the SIPP and performance review by the Investment Promotion Agency or the Fiscal Incentives Review Board, as the case may be: Provided, That existing registered projects or activities prior to the effectivity of Republic Act No. 11534 may qualify to register on or before December 31, 2024 and avail of the incentives granted under Republic Act No. 11534 for the prescribed period, subject to the criteria and conditions set forth in the SIPP.[261]
The period of availment of the foregoing income tax-based incentives shall commence from the actual start of commercial operations with the RBE availing of the tax incentives within three (3) years from the date of registration, unless otherwise provided in the SIPP and its corresponding guidelines.[261]
For the purpose of this Section, the determination of the category shall be based on both location and industry of the registered project or activity, and other relevant factors as may be defined in the Strategic Investment Priority Plan.
The location of the registered project or activity shall be prioritized according to the level of development as follows: (1) National Capital Region; (2) metropolitan areas or areas contiguous and adjacent to the National Capital Region; and (3) all other areas. The metropolitan areas shall be determined by the National Economic and Development Authority.
The industry of the registered project or activity shall be prioritized according to national industrial strategy specified in the Strategic Investment Priority Plan. The Strategic Investment Priority Plan shall define the coverage of the tiers and provide the conditions for qualifying the activities:
(1) Tier I shall include activities that (i) have high potential for job creation; (ii) take place in sectors with market failures resulting in underprovision of basic goods and services; (iii) generate value creation through innovation, upgrading or moving up the value chain; (iv) provide essential support for sectors that are critical to industrial development; or (v) are emerging owing to potential comparative advantage. [247]
(2) Tier II shall include activities that produce supplies, parts and components, and intermediate services that are not locally produced but are critical to industrial development and import-substituting activities, including crude oil refining.
(3) Tier III activities shall include (i) research and development resulting in demonstrably significant value-added, higher productivity, improved efficiency, breakthroughs in science and health, and high-paying jobs; (ii) generation of new knowledge and intellectual property registered and/or licensed in the Philippines; (iii) commercialization of patents, industrial designs, copyrights and utility models owned or co-owned by an RBE; (iv) highly technical manufacturing; or (v) are critical to the structural transformation of the economy and require substantial catch-up efforts, including but not limited to cyber-security, artificial intelligence, and data-center facilities.[261]
The period of availment of incentives based on the combination of both location and industry priorities, as determined in the SIPP, shall be as follows:
For exporters:[261]
| Location/Industry Tiers | Tier I | Tier II | Tier III |
| National Capital Region | 4 ITH + 10 EDR/SCIT, or 14 EDR/SCIT | 5 ITH + 10 EDR/SCIT, or 15 EDR/SCIT | 6 ITH + 10 EDR/SCIT, or 16 EDR/SCIT |
| Metropolitan areas or areas contiguous and adjacent to the National Capital Region | 5 ITH + 10 EDR/SCIT, or 15 EDR/SCIT | 6 ITH + 10 EDR/SCIT, or 16 EDR/SCIT | 7 ITH + 10 EDR/SCIT, or 17 EDR/SCIT |
| All other areas | 6 ITH + 10 EDR/SCIT, or 16 EDR/SCIT | 7 ITH + 10 EDR/SCIT, or 17 EDR/SCIT | 7 ITH + 10 EDR/SCIT, or 17 EDR/SCIT[261] |
For domestic market activities:
| Location/Industry Tiers | Tier I | Tier II | Tier III |
| National Capital Region | 4 ITH + 10 EDR, or 14 EDR | 5 ITH + 10 EDR, or 15 EDR | 6 ITH + 10 EDR, or 16 EDR |
| Metropolitan areas or areas contiguous and adjacent to the NCR | 5 ITH + 10 EDR, or 15 EDR | 6 ITH + 10 EDR, or 16 EDR | 7 ITH + 10 EDR, or 17 EDR |
| All other areas | 6 ITH + 10 EDR, or 16 EDR | 7 ITH + 10 EDR, or 17 EDR | 7 ITH + 10 EDR, or 17 EDR[261] |
In addition to the incentives provided in the tiers above, projects or activities of registered business enterprises located in areas recovering from armed conflict or a major disaster, as determined by the Office of the President, shall be entitled to two (2) additional years of income tax-based incentives.[261]
Projects or activities registered prior to the effectivity of this Act, or under the incentive system provided herein that shall, in the duration of their incentives, completely relocate from the National Capital Region, shall be entitled to three (3) additional years of income tax-based incentives: Provided, That the additional incentive shall commence at the completion of the relocation of operations.[261]
RBEs may continue to avail of the VAT zero-rating on local purchases and VAT exemption on importation under Section 294(E), and duty exemption on importation under Section 294(D), for the entire registration period as an RBE, reckoned from the date of registration, if the RBEs continue to meet the terms and conditions of registration by their respective Investment Promotion Agencies and if the RBEs maintain at least seventy percent (70%) of total annual production or output as export sales for the immediately preceding year.[260]
Registered domestic market enterprises may avail of duty exemption on importation from the date of registration until the expiration of the income tax-based incentives granted in this section.[260]
After the expiration of the entitlement to VAT zero-rating on local purchases and VAT exemption on importation under this Title, registered export enterprises may avail of the VAT zero-rating on local purchases and VAT exemption on importation under Sections 106, 108, and 109 of this Code: Provided, That they comply with the requirements set forth therein.[261]
SEC. 296-A. Period of Availment of Incentives for Projects or Activities Approved by the Fiscal Incentives Review Board.[260] - The period of availment of incentives granted by the Fiscal Incentives Review Board to RBEs shall be as follows:
(A) For an export enterprise under the SIPP, ITH of four (4) to seven (7) years, depending on location and industry priorities as specified in this section, followed by SCIT or EDR for twenty (20) years, or SCIT or EDR for a maximum period of twenty-four (24) to twenty-seven (27) years, depending on location and industry priorities: Provided, That the application for extension of availment of incentives shall only be allowed for the same registered project or activity if such project or activity employs at least ten thousand (10,000) direct local employees and maintains the said number during its registration, even if the registered project or activity no longer complies with the conditions and qualifications set forth in the SIPP: Provided, further, That the extension of availment of incentives shall not exceed ten (10) years, subject to the performance review by the Fiscal Incentives Review Board. Notwithstanding any provision to the contrary, no ITH shall be granted to registered export enterprises that have applied for extension of availment of incentives for the same project or activity.
A qualified expansion project or activity registered under this Act may qualify to avail of SCIT or EDR for thirteen (13) years, subject to the provisions of Sections 294(B) and (C), qualifications set forth in the SIPP and performance review by the Fiscal Incentives Review Board: Provided, That existing registered projects or activities prior to the effectivity of this Act may qualify to register and avail of the incentives granted under this Act for the prescribed period, subject to the criteria and conditions set forth in the SIPP. The qualified expansion project or activity may also be entitled to VAT exemption on importation and VAT zero-rating on local purchases under Section 294(E) and duty exemption on importation under Section 294(D).
(B) For domestic market enterprise under the SIPP, ITH of four (4) to seven (7) years, followed by EDR for twenty (20) years, or EDR for a maximum period of twenty-four (24) to twenty-seven (27) years, depending on location and industry priorities: Provided, That the application for extension of availment of incentives shall be allowed for the same registered project or activity only if employment level for such project or activity employs at least ten thousand (10,000) direct local employees and maintains the said number during its registration, even if the registered project or activity no longer complies with the conditions and qualifications set forth in the SIPP: Provided, further, That the extension of availment of incentives shall not exceed ten (10) years, subject to the performance review by the Fiscal Incentives Review Board. Notwithstanding any provision to the contrary, no ITH shall be granted to domestic market enterprises that have applied for extension of availment of incentives for the same project or activity.
A qualified expansion project or activity registered under this Act may qualify to avail of EDR for thirteen (13) years, subject to the provisions of Section 294(C), qualifications set forth in the SIPP, and performance review by the Investment Promotion Agency or Fiscal Incentives Review Board, as the case may be: Provided, That existing registered projects or activities prior to the effectivity of this Act may qualify to register and avail of the incentives granted under this Act for the prescribed period, subject to the criteria and conditions set forth in the SIPP. The qualified expansion project or activity may also be entitled to VAT exemption on importation and VAT zero-rating on local purchases under Section 294(E) and duty exemption on importation under Section 294(D).
The period of availment of the foregoing income tax-based incentives shall commence from the actual start of commercial operations with the RBE availing of the tax incentives within three (3) years from the date of registration, unless otherwise provided in the SIPP and its corresponding guidelines.
The period of availment of incentives based on the combination of both location and industry priorities, as determined in the SIPP, shall be as follows:
For exporters:
| Location/Industry Tiers | Tier I | Tier II | Tier III |
| National Capital Region | 4 ITH + 20 SCIT/EDR, or 24 SCIT/EDR | 5 ITH + 20 SCIT/EDR, or 25 SCIT/EDR | 6 ITH + 20 SCIT/EDR, or 26 SCIT/EDR |
| Metropolitan areas or areas contiguous and adjacent to the National Capital Region | 5 ITH + 20 SCIT/EDR, or 25 SCIT/EDR | 6 ITH + 20 SCIT/EDR, or 26 SCIT/EDR | 7 ITH + 20 SCIT/EDR, or 27 SCIT/EDR |
| All other areas | 6 ITH + 20 SCIT/EDR, or 26 SCIT/EDR | 7 ITH + 20 SCIT/EDR, or 27 SCIT/EDR | 7 ITH + 20 SCIT/EDR, or 27 SCIT/EDR[261] |
For domestic market activities:
| Location/Industry Tiers | Tier I | Tier II | Tier III |
| National Capital Region | 4 ITH + 20 EDR, or 24 EDR | 5 ITH + 20 EDR, or 25 EDR | 6 ITH + 20 EDR, or 26 EDR |
| Metropolitan areas or areas contiguous and adjacent to the NCR | 5 ITH + 20 EDR, or 25 EDR | 6 ITH + 20 EDR, or 26 EDR | 7 ITH + 20 EDR, or 27 EDR |
| All other areas | 6 ITH + 20 EDR, or 26 EDR | 7 ITH + 20 EDR, or 27 EDR | 7 ITH + 20 EDR, or 27 EDR[261] |
RBEs may continue to avail of the VAT zero-rating on local purchases and VAT exemption on importation under Section 294(E), and duty exemption on importation under Section 294(D), for the entire registration period as an RBE, reckoned from the date of registration, if the RBEs continue to meet the terms and conditions of their registration with their respective Investment Promotion Agencies and if the following requirements are met for the immediately preceding year:[260]
(1) Registered export enterprises maintain at least seventy percent (70%) of total annual production or output as export sales;
(2) High-value domestic market enterprises satisfy the investment capital or export requirement under Section 293(J) of this Code. Qualified high-value domestic market enterprises may avail of the said incentives from the date of registration until the expiration of the income tax-based incentives granted in this section.
Registered domestic market enterprises may avail of duty exemption from the date of registration until the expiration of the income tax-based incentives granted in this section.[260]
After the expiration of the entitlement to VAT zero-rating on local purchases and VAT exemption on importation under this Title, registered export enterprises may avail of the VAT zero-rating on local purchases and VAT exemption on importation under Sections 106, 108, and 109 of this Code: Provided, That they comply with the requirements set forth therein.[260]
In addition to the incentives provided in the tiers above, projects or activities of registered business enterprises located in areas recovering from armed conflict or a major disaster, as determined by the Office of the President, shall be entitled to two (2) additional years of income tax-based incentives.[260]
Projects or activities registered prior to the effectivity of this Act or under the incentive system provided herein that completely relocate from the National Capital Region, within the duration of their incentives, shall be entitled to three (3) additional years of income tax-based incentives: Provided, That the additional incentive shall commence upon the completion of the relocation of operations.[260]
CHAPTER III
THE FISCAL INCENTIVES REVIEW BOARD
SEC. 297. Expanded Functions of the Fiscal Incentives Review Board. - The functions and powers of the Fiscal Incentives Review Board created under Presidential Decree No. 776, as amended, shall be further expanded as follows:
(A) To exercise policy-making, oversight, regulatory, and quasi-judicial functions on the administration and grant of tax incentives by the Investment Promotion Agencies and other government agencies administering tax incentives. In particular, the Fiscal Incentives Review Board shall:
(1) Determine the target performance metrics as conditions to avail of tax incentives[261];
(2) Review and audit the compliance of Investment Promotion Agencies and other government agencies administering tax incentives, with respect to the administration and grant of tax incentives and impose sanctions such as, but not limited to, withdrawal, suspension, or cancellation of their authority to grant tax incentives under this Title without prejudice to the conduct of inquiry, investigation, and filing of appropriate criminal and administrative cases against erring officials and employees in accordance with the procedures prescribed under existing laws[261];
(3) Conduct regular monitoring and evaluation of investment and non-investment tax incentives, such as using cost-benefit analysis to determine their impact on the economy and whether agreed performance targets are met; and prescribe data requirements, reporting standards, processes, and procedures for the application of incentives for the calculation of costs and benefits upon application;[260]
(4) Check and verify, as necessary, the compliance of RBEs, through the Investment Promotion Agencies, with the terms and conditions of their availment, in particular the agreed target performance metrics, rules and regulations of this Act, and other relevant laws or issuances[261];
(5) Provide Investment Promotion Agencies with capacity-building activities to ensure that they are equipped to comply with reportorial requirements[260]; and
(6) Assess its organizational structure, focusing on the adequacy of its human resources for regulatory and quasi-judicial functions. If necessary, the Fiscal Incentives Review Board shall submit to the Department of Budget and Management the proposed organizational changes to strengthen its human resources in accordance with existing laws and regulations.[260]
For this purpose, all Investment Promotion Agencies and other government agencies administering tax incentives shall annually furnish the Fiscal Incentives Review Board with all the issuances related to the grant and administration of incentives.[260]
(B) To approve or disapprove, the grant of tax incentives to the extent of the registered project or activity listed in the SIPP upon the recommendation of the Investment Promotion Agency: Provided, That the application for tax incentives shall be duly accompanied by a cost-benefit analysis: Provided, further, That the Investment Promotion Agencies shall use the Fiscal Incentives Review Board-prescribed data requirements and methodologies for the application of incentives in calculating the costs and benefits upon application: Provided, further, That the Investment Promotion Agencies shall grant the tax incentives to registered projects or activities listed in the SIPP with investment capital of Fifteen billion pesos (P15,000,000,000) and below: Provided, furthermore, That the Fiscal Incentives Review Board, in consultation with the Investment Promotion Agencies, may increase the threshold amount of Fifteen billion pesos (P15,000,000,000);[251][261]
(C) To approve applications for tax subsidies to government-owned or -controlled corporations, government instrumentalities, government commissaries, and state universities and colleges.
For this purpose, the other government agencies shall ensure complete submission of applications, documents, records, books, or other relevant data or material;[261]
(D) To formulate additional time-bound or place-specific projects or activities for inclusion in the SIPP during periods of recovery from calamities and post-conflict situations and where the Fiscal Incentives Review Board determines that there is a need to attract many classes, firms, and other investors that would accelerate the growth of a region's flagship industries, in accordance with the Medium-Term Development Plan and Republic Act No. 11962, otherwise known as the 'Trabaho Para sa Bayan Act,' and recommend incentives to the President;[261]
(E) To cancel, suspend, or withdraw, after due process, the enjoyment of fiscal incentives of concerned RBEs on its own initiative or upon the recommendation of the Investment Promotion Agency for flagrant and material violations of any of the conditions imposed in the grant of fiscal incentives, including, but not limited to, the non-compliance with the agreed performance commitments, and endorse RBEs whose incentives are cancelled, suspended, or withdrawn to the concerned revenue agencies for the assessment and collection of taxes and duties due commencing from the first year of availment;[261]
(F) To cancel, suspend, or withdraw the enjoyment of tax subsidy of concerned government-owned or -controlled corporations, government instrumentalities, government commissaries, and state universities and colleges, and when necessary, endorse the same to the concerned revenue agencies for assessment and collection of taxes and duties due, including fines or penalties, if warranted, for violations of any of the conditions imposed in the grant of tax subsidy, or provisions of this Act, or applicable rules;
(G) To require Investment Promotion Agencies and other government agencies administering tax incentives to submit, regularly or when requested, summaries of approved investment and incentives granted, and firm- or entity-level tax incentives and benefits data as input to the Fiscal Incentives Review Board's review and audit function, and evaluation of performance of recipients of tax incentives. For this purpose, the Fiscal Incentives Review Board shall maintain a masterlist of registered products and services for export or domestic consumption that are entitled to incentives: Provided, That to facilitate compliance with the foregoing, the DTI, in coordination with relevant regulatory bodies, shall cause the registration and reporting by RBEs of the types of services rendered whether domestically or to foreign clients; types of products manufactured domestically, products imported and sold locally, and products exported;[261]
(H) To publish regularly, per firm, the data pertaining to the amount of tax incentives, tax payments, and other related information, including benefits data, subject to the provisions of Chapter V of this Title;[261]
(I) To obtain information, summon, examine, inquire and receive from other government agencies administering tax incentives, government-owned or -controlled corporations, government instrumentalities, government commissaries, state universities and colleges, and local government units, documents, records, books, or other data relevant or material to the resolution of issues arising from the approval, disapproval, cancellation, suspension, withdrawal or forfeiture of tax subsidy, or in imposing penalties for violations of the terms and conditions on the availment of tax subsidy, or any of the provisions of this Act;
(J) To submit annual reports to the Office of the President, as part of the budget process, covering its policy and activities in the administration of this Act, including recommendations on tax incentive policies and approval of tax incentives;
(K) To decide on issues, on its own initiative or upon the recommendation of the Investment Promotion Agency, after due hearing, concerning the approval, disapproval, cancellation, suspension, withdrawal, or forfeiture of tax incentives or tax subsidy in accordance with this Act. The Fiscal Incentives Review Board shall decide on the matter within ninety (90) days from the date when the Fiscal Incentives Review Board declares the issues submitted for resolution. A business enterprise adversely affected by the decision of the Fiscal Incentives Review Board may, within thirty (30) days from receipt of the adverse decision, appeal the same to the Court of Tax Appeals;[261]
(L) To promulgate such rules and regulations as may be necessary to implement the intent and provisions of this Title. The Fiscal Incentives Review Board may use any electronic means of publication in the Official Gazette or its official website;[261]
(M) To recommend to the President the grant of appropriate non-fiscal incentives in accordance with the Strategic Investment Priority Plan for highly desirable projects or very specific industrial activities and based on: (a) benefit-cost analysis approved by the Fiscal Incentives Review Board; and (b) containing a schedule of budgets of expenditures and sources of financing with magnitudes provisionally approved via resolution for inclusion in the upcoming National Expenditure Plans by the Development Budget Coordination Committee;
(N) To adopt policies for the development and expansion of the domestic supply chain in order to reduce dependence on imports; promote diversification and sophistication of products produced and services offered, whether exported or consumed locally; and cater to local market demand; and
(O) To recommend policies to prevent abuse of fiscal incentives availment and tax evasion under this Code and smuggling activities; and[260]
(P) To exercise all other powers necessary or incidental to attain the purposes of this Act and other laws vesting additional functions on the Fiscal Incentives Review Board.[252]
Notwithstanding the provisions in the preceding paragraphs, tax and duty incentives granted through legislative franchises shall be excepted from the foregoing expanded powers of the Fiscal Incentives Review Board to review, withdraw, suspend, or cancel tax incentives and subsidies.
SEC. 297-A. Processing of Tax Incentive Applications. — The Fiscal Incentives Review Board and Investment Promotion Agencies shall issue a decision on applications for tax incentives within twenty (20) working days from the receipt of all required documents, in accordance with Section 9 of Republic Act No. 11032, otherwise known as the 'Ease of Doing Business and Efficient Government Service Delivery Act of 2018.' An extension of the processing period may be permitted only once, and shall in no case exceed an additional twenty (20) working days.
SEC. 298. Composition of the Fiscal Incentives Review Board. - The Fiscal Incentives Review Board shall be reconstituted as follows:
| Chairperson | - | Secretary of Finance |
| Co-Chairperson | - | Secretary of Finance |
| Members | - | Executive Secretary of the Office of the President |
| - | Secretary of Budget and Management | |
| - | Director General of the National Economic and Development Authority |
The Board shall have a technical committee, which shall serve as its main support unit and perform functions as may be assigned, and shall be composed of the following:
| Chairperson | - | Undersecretary of Finance |
| Members | - | Undersecretary or Assistant Secretary of the Office of the Executive Secretary |
| - | Undersecretary of Trade and Industry and Board of Investments Managing Head or Assistant Secretary of Trade and Industry | |
| - | Undersecretary or Assistant Secretary of Budget and Management | |
| - | Deputy or Assistant Director General of the National Economic and Development Authority | |
| - | Commissioner or Deputy Commissioner of Internal Revenue | |
| - | Commissioner or Deputy Commissioner of Customs | |
| - | Commissioner of the Philippine Competition Commission | |
| - | Director General or Chairperson or Administrator of the Investment Promotion Agencies: Provided, That the participation of the Investment Promotion Agency representative in deliberations and decision-making processes of the technical committee shall be limited to the matters concerning their Investment Promotion Agency | |
| Secretariat | - | The secretariat shall be headed by an Assistant Secretary of Finance and shall be staffed by the National Tax Research Center. |
SEC. 299. Structure and Staffing Pattern. - To support the expanded functions of the Fiscal Incentives Review Board, the National Tax Research Center, as secretariat thereof, shall create three (3) additional groups, namely, Fiscal Incentives Management Group, Monitoring and Evaluation Group, and Legal Group. Each group shall be composed of at least two (2) divisions, which will be headed by a deputy executive director. The existing administrative and financial branch of the National Tax Research Center shall be converted into a group to be headed by a deputy executive director and will be composed of four (4) divisions, namely, finance, human resource management and development, general services, and management and information system.
Provided, That the Fiscal Incentives Review Board secretariat is authorized to determine its organizational structure and staffing pattern, and create such services, divisions, and units, as it may require or deem necessary in the future, subject to the approval by the Department of Budget and Management: Provided, finally, That nothing herein modifies the existing organizational structure and staffing pattern of the Investment Promotion Agencies or affects their power to maintain or determine their respective organizational structure and staffing pattern.
CHAPTER IV
QUALIFIED PROJECTS OR ACTIVITIES FOR TAX INCENTIVES
SEC. 300. Strategic Investment Priority Plan. - The BOI, in consultation with the Fiscal Incentives Review Board, and the Investment Promotion Agencies, other government agencies administering tax incentives, and the private sector, shall formulate the SIPP to be submitted to the President for approval, which may contain recommendations for types of non-fiscal support needed to create high-skilled jobs to grow a local pool of enterprises, particularly micro, small and medium enterprises (MSMEs), that can supply to domestic and global value chains, to increase the sophistication of products and services that are produced and/or sourced domestically, to expand domestic supply and reduce dependence on imports, and to attract significant foreign capital or investment. The SIPP may include areas of investment that are specific to an area or region, taking into consideration the project or activity that the Investment Promotion Agencies in those areas or regions deem fit to promote, in order to foster regional growth and attract investments: Provided, That the project or activity identified by the Investment Promotion Agencies shall be consistent with the Philippine Development Plan and Republic Act No. 11962, otherwise known as the 'Trabaho Para sa Bayan Act.' The SIPP shall be valid for a period of three (3) years, subject to review and amendment every three (3) years thereafter unless there would be a supervening event that would necessitate its review: Provided, That the BOI shall cause the publication of the rules and regulations implementing the SIPP, including any amendments thereof, in the Official Gazette or newspaper of general circulation, and on its official website, to be effective.[261]
The SIPP shall contain the following:
(A) Priority projects or activities that are included in the Philippine Development Plan or its equivalent, or other government programs, taking into account any of the following:
(1) Substantial amount of investments;
(2) Considerable generation of employment, especially towards less developed areas;
(3) Considerable amount of net exports;
(4) Use of modern, advance, or new technology;
(5) Processes and innovations that will lead towards the attainment of the sustainable development goals, shall include, but not be limited to, adoption of adequate environmental protection systems and sustainability strategies;
(6) Addressing missing links and other gaps in the supply or value chain or otherwise moving up the value chain or product ladder;
(7) Promotion of market competitiveness;
(8) Enhancement of the capabilities of Filipino enterprises and professionals to produce and offer increasingly sophisticated products and services;
(9) Contribution to Philippine food security and increase incomes in the agriculture and fisheries sector; or
(10) Services and activities that can promote regional and global operations in the country.
(B) Scope and coverage of location and industry tiers in Section 296.
All sectors or industries that may be included in the SIPP shall undergo an evaluation to determine the suitability and potential of the industry or the sector in promoting long-term growth and sustainable development, and the national interest. In no case shall a sector or industry be included in the SIPP unless it is supported by a formal evaluation process or report.
The projects or activities must comply with the specific qualification requirements or conditions for a particular sector or industry and other limitations as set and determined by the Board of Investments, and in coordination with the Fiscal Incentives Review Board.
In no case shall the Investment Promotion Agencies accept applications unless the project or activity is listed in the SIPP. Projects or activities not listed in the SIPP shall be automatically disapproved.
SEC. 301. Power of the President to Grant Incentives. - Notwithstanding the provisions of Sections 295, 296, and 296-A, the President may, in the interest of national economic development, or upon the recommendation of the Fiscal Incentives Review Board, modify the mix, period or manner of availment of incentives provided under this Code or craft the appropriate fiscal and non-fiscal support package for a highly desirable project or a specific industrial activity based on defined development strategies for creating high-value jobs, building new industries to diversify economic activities, and attracting significant foreign and domestic capital or investment, and the fiscal requirements of the activity or project, subject to maximum incentive levels recommended by the Fiscal Incentives Review Board: Provided, That the grant of ITH shall not exceed ten (10) years followed by SCIT of five percent (5%) or EDR; or SCIT or EDR, which may be immediately granted at the start of commercial operations: Provided, further, That the total period of income tax-based incentive availment shall not exceed forty (40) years.[261]
The Fiscal Incentives Review Board shall determine whether the benefits that the government may derive from such investment are clear and convincing and far outweigh the cost of incentives that will be granted in determining whether a project or activity is highly desirable.
The determination by the Fiscal Incentives Review Board shall guide the President in calibrating either or both the magnitude of the incentives to be granted and the agreed performance target corresponding to the grant.[260]
The President may exercise the powers under this section: Provided, That the following conditions are satisfied:[261]
(1) The project has a comprehensive sustainable development plan with clear inclusive business approaches, and high level of sophistication and innovation; and
(2) Minimum investment capital of Fifty billion pesos (P50,000,000,000) or its equivalent in US dollars, or a minimum direct local employment generation of at least ten thousand (10,000) within three (3) years from the issuance of the certificate of entitlement.
Provided, That the threshold shall be subject to a periodic review by the Fiscal Incentives Review Board every three (3) years, taking into consideration international standards or other economic indicators: Provided, further, That if the project fails to substantially meet the projected impact on the economy and agreed performance targets, the Fiscal Incentives Review Board shall recommend to the President the cancellation of the tax incentive or fiscal and non-fiscal support package or the modified period or manner of availment of incentives, after due hearing and an adequate opportunity to substantially comply with the agreed performance targets and outputs.[261]
For this purpose, the President may grant non-fiscal support package limited to the utilization of government resources such as use of land and budgetary support provision under the annual General Appropriations Act.[261]
This power of the President, in as far as it commands additional public sector expenditures in support of investors, is suspended during fiscal years when, an unmanageable fiscal deficit is declared by the President on the advice of the Development Budget Coordination Committee with a consequence that even core budgetary obligations, such as, but not limited to, mandatory revenue allotments for local government units and budget for the National Economic and Development Authority's core public investments program, cannot be fully financed.[253]
Notwithstanding the provisions in the preceding paragraphs, tax and duty incentives granted through legislative franchises shall be excepted from the foregoing powers of the President to review, withdraw, suspend, or cancel tax incentives and subsidies.
SEC. 302. Amendments to the Strategic Investment Priority Plan. - Subject to publication requirements and the criteria for investment priority determination, the Board of Investments may include additional areas in the Strategic Investment Priority Plan, alter any of the terms of the declaration of an investment area, and temporarily suspend projects or activities on the Strategic Investment Priority Plan if it considers that such project or activity is no longer a priority within the effectivity of the Strategic Investment Priority Plan.
SEC. 303. Publication. - Upon approval of the Strategic Investment Priority Plan, in whole or in part, or upon approval of an amendment thereof, the Plan or the amendment, specifying and declaring the areas of investments shall be published in at least one (1) newspaper of general circulation or in the Official Gazette: Provided, That all such areas in the existing Strategic Investment Priority Plan shall be open for application until publication of an amendment or deletion thereof.
SEC. 304. Qualifications of a Registered Business Enterprise for Tax Incentives. - In the review and grant of tax incentives, the registered business enterprise must:
(A) Be engaged in a project or activity included in the Strategic Investment Priority Plan;
(B) Meet the target performance metrics after the agreed time period;
(C) Install an adequate accounting system that shall identify the investments, revenues, costs and profits or losses of each registered project or activity undertaken by the enterprise separately from the aggregate investments, revenues, costs and profits or losses of the whole enterprise; or establish a separate corporation for each registered project or activity if the Investment Promotion Agency should so require;
(D) Comply with the e-receipting and e-sales requirement in accordance with Sections 237 and 237(a) of this Code; and
(E) Submit annual reports of beneficial ownership of the organization and related parties.
CHAPTER V
TAX INCENTIVES MANAGEMENT AND TRANSPARENCY
SEC. 305. Filing of Tax Returns and Submission of Tax Incentives Reports. - All registered business enterprises and other registered entities whether taxable or exempt, are required to file their tax returns and pay their tax liabilities, on or before the deadline as provided under the National Internal Revenue Code of 1997, as amended, using the electronic system for filing and payment of taxes with the Bureau of Internal Revenue: Provided, That for purposes of complying with their tax obligations, cooperatives and other registered entities, which do not have access to the electronic facilities, shall file with their respective revenue district offices.
For registered business enterprises and other registered enterprises availing of tax incentives administered by the Investment Promotion Agencies and other government agencies administering tax incentives, they shall file with their respective Investment Promotion Agencies or other government agencies administering tax incentives a complete annual tax incentives report of their income-based tax incentives, VAT exemptions and zero-rating, customs duty exemptions, deductions, credits or exclusions from the income tax base, and exemptions from local taxes, as provided under Section 294 of this Act and in the special laws of the concerned Investment Promotion Agency or other government agency administering tax incentives, and respective laws, and a complete annual benefits report which shall include data such as, but not limited to, the approved and actual amount of investments, approved and actual employment level and job creation including information on quality of jobs and hiring of foreign and local workers, approved and actual exports and imports, domestic purchases, profits and dividend payout, all taxes paid, withheld and foregone within thirty (30) calendar days from the statutory deadline for filing of tax returns and payment of taxes: Provided, That a copy of the report shall be simultaneously submitted to the Fiscal Incentives Review Board in electronic form.
The Investment Promotion Agencies and other government agencies administering tax incentives shall, within sixty (60) calendar days from the end of the statutory deadline for filing of the relevant tax returns, submit to the Bureau of Internal Revenue, their respective annual tax incentives reports based on the list of the registered business enterprises and other registered enterprises, which have filed said tax incentives report: Provided, That the reportorial requirement under Section 3 of Republic Act No. 10963 or the ‘TRAIN Law’ shall be covered by this Section.
The details of the tax incentives reports, as provided in the preceding paragraphs, shall be provided in the implementing rules and regulations of this Act.
The foregoing provisions shall be without prejudice to the right of the Bureau of Internal Revenue and the Bureau of Customs to assess and/or audit tax liabilities, if any, within the prescribed period provided in the National Internal Revenue Code of 1997, as amended, and Republic Act No. 10863, otherwise known as the Customs Modernization and Tariff Act, as amended, respectively.
SEC. 306. Monitoring, Evaluation, and Reporting of Tax Incentives. - Notwithstanding any law to the contrary, the Bureau of Internal Revenue and the Bureau of Customs shall submit to the Department of Finance: (a) all tax and duty incentives of registered business enterprises and other registered enterprises, as reflected in their filed tax returns and import entries; and (b) actual tax and duty incentives as evaluated and determined by the Bureau of Internal Revenue and the Bureau of Customs.
The Department of Finance shall maintain a single database for monitoring and analysis of tax incentives granted.
The Fiscal Incentives Review Board is mandated to systematically collect and store all tax incentives and benefit data from the Department of Finance, Investment Promotion Agencies, other government agencies administering tax incentives, registered business enterprises, and other registered enterprises, as well as to evaluate and assess the process, outcomes, and impact of incentives granted to firms to determine whether agreed performance targets and intended results and outcomes are met. The method of evaluation may include the conduct of cost-benefit analysis or other process and impact evaluation methods: Provided, That for purposes of this Act, the term cost-benefit analysis refers to the systematic evaluation of the total costs of granting tax incentives vis-à-vis the total benefits derived from the grant of tax incentives based on the annual tax incentive report, annual benefits report, and other related sources, to calculate the net benefit or cost associated with tax incentives.
For purposes of monitoring and transparency, the Department of Finance shall submit to the Department of Budget and Management (DBM) a per firm and per registered project and activity data arranged on a sectoral and per industry basis: (1) the amount of tax incentives availed of by registered business enterprises and other registered enterprises; (2) the estimate claims of tax incentives immediately preceding the current year; (3) the programmed tax incentives for the current year; and (4) the projected tax incentives for the following year.
The aforesaid data shall be reflected by the DBM in the annual Budget of Expenditures and Sources of Financing (BESF), which shall be known as the Tax Incentives Information (TII) Section: Provided, That the tax incentives information shall include a per firm data related to incentives availed of by registered business enterprises and other registered enterprises based on the submissions of the Department of Finance and the concerned Investment Promotion Agencies and other government agencies administering tax incentives, categorized by sector, by Investment Promotion Agency or other government agency administering tax incentives, and by type of tax incentive: Provided, further, That the results of the cost-benefit analysis shall be published at the per firm level by the Fiscal Incentives Review Board and a report shall be submitted to the President and Congress on an annual basis.
SEC. 307. Conduct of Impact Evaluation on Tax Incentives. - The Fiscal Incentives Review Board is mandated to conduct impact evaluation such as a cost-benefit analysis on the investment and non-investment incentives to determine the impact of tax incentives on the Philippine economy and on the relevant sector.
For this purpose, the Department of Finance, all heads of the Investment Promotion Agencies and other government agencies administering tax incentives shall submit to the Fiscal Incentives Review Board per firm- and per registered project- or activity-level in a machine-readable format:
(1) Data on tax incentives based on the submissions of registered business enterprises and other registered enterprises; and
(2) Other investment- and non-investment-related data.
A third party government institution may conduct on its own or upon request of the Fiscal Incentives Review Board a peer review of the impact evaluation of the Board, or a parallel impact evaluation on the investment and non-investment incentives to determine the impact of the tax incentives on the Philippine economy and on the relevant sector: Provided, That for this purpose the Fiscal Incentives Review Board may provide anonymized firm-level data to the third party government institution, subject to a data sharing agreement.
SEC. 308. Penalties for Noncompliance with Filing and Reportorial Requirements. - Any RBE or other registered enterprise, which fails to comply with filing and reportorial requirements with the appropriate Investment Promotion Agencies or other government agencies administering tax incentives and/or, which fails to show proof of filing of tax returns using the electronic system for filing and payment of taxes of the BIR under Section 305 hereof, shall be imposed the following penalties by the appropriate Investment Promotion Agency or other government agency administering tax incentives:[261]
(A) First (1st) Violation — Payment of a fine amounting to One hundred thousand pesos (P100,000.00);[261]
(B) Second (2nd) Violation — Payment of a fine amounting to Five hundred thousand pesos (P500,000.00);[261] and
(C) Third (3rd) Violation — Cancellation by the Investment Promotion Agency of the registration of the RBE.[261]
Provided, That if the failure to show such proof is not due to the fault of the RBEs or other registered enterprises, the same shall not be a ground for the suspension of the ITH and/or other tax incentives availment: Provided, further, That collections from the penalties shall accrue to the general fund.
After due process, the concerned Investment Promotion Agency may cancel the registration, suspend the enjoyment of incentive benefits of any registered enterprise, and/or require refund of incentives enjoyed by such enterprise, including interests and monetary penalties, for any willful and material misrepresentation of information or submission of falsified or misleading information or documents for the purpose of availing of more incentives than what it is entitled to under this Code: Provided, further, That in case of cancellation of the certificate of registration, the project or activity of the RBE shall cease to be registered and the RBE shall be required to pay all appropriate taxes and duties from the date the cancellation order becomes final and executory.[261]
Provided, That the Investment Promotion Agency, with the recommendation of the Commissioner, may revoke or suspend incentives granted by the Investment Promotion Agency, and/or order a business closure of the RBE that violates Title VI (Excise Taxes on Certain Goods) and Title X (Statutory Offenses and Penalties) of this Code and other related revenue regulations, orders, or issuances of the government: Provided, further, That such authority shall cover the acts of the RBE committed even in the first year of availment of incentives. Notwithstanding the provisions of this section, the DOF, the BIR, and the BOC shall retain their respective mandates, powers and functions as provided for under this Act and related laws.[261]
Any government official or employee who fails without justifiable reason to provide or furnish the required tax incentives report or other data or information as required under Sections 306 and 307 of this Act shall be penalized, after due process, by a fine equivalent to the official's or employee's basic salary for a period of one (1) month to six (6) months or by suspension from government service for not more than one (1) year, or both, in addition to any criminal and administrative penalties imposable under existing laws.
CHAPTER VI
TRANSITORY AND MISCELLANEOUS PROVISIONS
SEC. 309. Prohibition on Registered Activities. - A qualified registered project or activity under an Investment Promotion Agency administering an economic zone or freeport shall be exclusively conducted or operated within the geographical boundaries of the zone or freeport being administered by the Investment Promotion Agency in which the project or activity is registered: Provided, That a registered business enterprise may conduct or operate more than one qualified registered project or activity within the same zone or freeport under the same Investment Promotion Agency: Provided, further, That any project or activity conducted or performed outside the geographical boundaries of the zone or freeport shall not be entitled to the incentives provided in this Act, unless such project or activity is conducted or operated under another Investment Promotion Agency.
SEC. 310. Establishment of One-Stop Action Center and Initial Point of Contact for Foreign Investment Leads.[261] - All Investment Promotion Agencies shall establish a one-stop shop or one-stop action center that will facilitate and expedite, to the extent possible, the setting up and conduct of registered projects or activities, including assistance in coordinating with the local government units and other government agencies to comply with Republic Act No. 11032, otherwise known as the 'Ease of Doing Business and Efficient Government Service Delivery Act of 2018': Provided, however, That the enterprises shall continue to avail of the one-stop shop facility notwithstanding the expiration of their incentives under this Code.
Unless, otherwise provided under special laws, local government units may delegate to the concerned Investment Promotion Agency, through appropriate memoranda of agreement, the functions of accepting, processing, and granting business permits and licenses.[260]
The Investment Promotion Agency may also assist RBEs in obtaining licenses and permits from national government agencies by accepting and submitting documentary requirements for such licenses and permits, on behalf of the RBEs to the appropriate national government agencies.[260]
The Investment Promotion Agency may undertake activities necessary to perform the function as the initial point of contact for foreign investment leads. Such activities shall include assisting potential foreign investors in establishing their business enterprises in the concerned Investment Promotion Agency or in the economic zone best suited to their specific needs.[260]
SEC. 311. Investments Prior to the Effectivity of Republic Act No. 11534. - RBEs with incentives granted prior to the effectivity of Republic Act No. 11534 shall be subject to incentives granted in their certificate of registration or certificate of registration and tax exemption, and to the following rules:[261]
(A) Registered business enterprises whose projects or activities were granted only an income tax holiday prior to the effectivity of this Act shall be allowed to continue with the availment of the income tax holiday for the remaining period of the income tax holiday as specified in the terms and conditions of their registration: Provided, That for those that have been granted the income tax holiday but have not yet availed of the incentive upon the effectivity of this Act, they may use the income tax holiday for the period specified in the terms and conditions of their registration;
(B) RBEs, whose projects or activities were granted an ITH prior to the effectivity of Republic Act No. 11534 and are entitled to the five percent (5%) tax on gross income earned incentive after the ITH, shall be allowed to avail of the five percent (5%) tax on gross income earned incentive based on Subsection (C), including all corresponding exemptions from national taxes, local taxes, and local fees and charges until December 31, 2034;[261]
(C) RBEs currently availing of the five percent (5%) tax on gross income earned granted prior to the effectivity of Republic Act No. 11534 shall be allowed to continue availing of the said tax incentives at the rate of five percent (5%), including all corresponding exemptions from national taxes, local taxes, and local fees and charges until December 31, 2034;[261] and
(D) RBEs availing of duty exemption on importation under Section 294(D), VAT exemption on importation, and VAT zero-rating on local purchases under Section 294(E) prior to the effectivity of Republic Act No. 11534 shall be allowed to continue availing of the said tax incentives until December 31, 2034: Provided, That registered export enterprises shall continue to avail of the said incentives thereafter, in accordance with Title IV of this Code, the provisions of Republic Act No. 10863, otherwise known as the 'Customs Modernization and Tariff Act,' as amended, and other applicable laws.[260]
