General Principles on the Grant and Administration of Incentives.
SEC. 85. General Principles on the Grant and Administration of Incentives. —
Recognizing the strategic economic importance of tourism, the necessity that investments within TEZs be properly coordinated with environmental, cultural and developmental imperatives, and the fundamental differences between the export manufacturing and tourism industries, the TIEZA shall have sole and exclusive jurisdiction to grant the incentives hereinafter provided.
In the formulation of rules and regulations defining and implementing these incentives, and without derogating therefrom, the TIEZA may coordinate with the Board of Investments and other government agencies or entities responsible for the grant and administration of incentives to assist in the development of a rationalized national investment incentive policy.
In the grant of incentives, it shall give equal preference to large investments, those with great potential for employment generation and those of local small and medium enterprises. Registered tourism enterprises owned and operated by overseas Filipino investors shall enjoy the same incentives granted to TEZ operators and registered enterprises in general. The amount of required investments shall be defined in the implementing rules and regulations of this Act. The incentive schemes set forth in Sections 86, 87 and 88 shall be in effect for a period of ten (10) years from the effectivity of this Act, which period is subject to review by the Joint Congressional Oversight Committee on Tourism.
The TIEZA shall further coordinate with the Bureau of Customs and the Bureau of Internal Revenue in the preparation and enforcement of rules and regulations to prevent the abuse of these incentives.
The jurisdiction of the TIEZA in the grant and administration of incentives shall not be impliedly repealed or modified.
The Department and the DTI shall promulgate rules and regulations to govern the relationship between TEZs created under this Act, and economic zones created under Republic Act No. 7227, otherwise known as the Bases Conversion and Development Act of 1992, and Republic Act No. 7916, as amended, otherwise known as the Special Economic Zone Act of 1995, where an area comprising a TEZ overlaps, falls within or encompasses that of an economic zone: Provided, That such rules and regulations shall consider the special nature and requirements of tourism in relation to other industries, establishments and operations in economic zones. TEZs proclaimed as such prior to the passage of this Act shall be transferred to the supervision of the TIEZA.
The investment incentives offered under this Act shall be without prejudice to availing other incentives provided under other laws, decrees and presidential issuances. However, where such other laws, decrees or presidential issuances provide for similar or identical incentive schemes, the investor may only elect to avail of the scheme provided under one particular law, decree or presidential issuance.
LGUs are likewise encouraged to provide incentives for tourism enterprises through, among others, reductions in applicable real estate taxes and waivers of fees and charges, among others. Should a LGU grant such incentives, it shall report the same to the Department and the TPB to assist in the marketing and promotions of investment in that LGU.
SUBCHAPTER V-A. INCENTIVES FOR TEZ OPERATORS
AND REGISTERED TOURISM ENTERPRISES
Fiscal Incentives Available to TEZ Operators and Registered Enterprises.
SEC. 86. Fiscal Incentives Available to TEZ Operators and Registered Enterprises. — The following incentives may, in the discretion of the TIEZA Board, be granted to registered tourism enterprises within TEZs:
Income Tax Holiday. New enterprises in Greenfield and Browfield Tourism Zones shall, from the start of business operations, be exempt from tax on income for a period of six (6) years. This income tax holiday may be extended if the enterprise undertakes a substantial expansion or upgrade of its facilities prior to the expiration of the first six (6) years.
This extension shall consider the cost of such expansion or upgrade in relation to the original investment, but shall in no case exceed an additional six (6) years. These enterprises shall likewise be allowed to carry over as deduction from the gross income for the next six (6) consecutive years immediately following the year of the loss, their net operating losses for any taxable year immediately preceding the current taxable year which had not been previously offset as deduction from gross income.
An existing enterprise in a Brownfield Tourism Zone shall likewise enjoy the incentives extended to new enterprises in Greenfield and Brownfield Tourism Zones mentioned in the preceding paragraph.
An existing enterprise in a Brownfield Tourism Zone shall be entitled to avail of a non-extendible income tax holiday if it undertakes an extensive expansion or upgrade of facilities. Such an income tax holiday shall consider the cost of such expansion or upgrade in relation to the original investment, but shall in no case exceed six (6) years to be counted from the time of completion of the expansion or upgrade: Provided, That capital expenditures subject to income tax holiday shall be understood to mean money spent to acquire or upgrade physical assets, such as buildings, machinery and equipment, intended to extend the life of an asset or increase the capacity or efficiency of a tourism enterprise that benefit the current and future periods: Provided, further, That in case of expansion involving the improvement of existing structures or constructing new ones, such expansion shall consider the substantial amount infused, the substantial number of rooms added or constructed and, where applicable, their change in classification from three-star to five-star establishments.
The provisions of this subsection shall likewise apply to tourism enterprises outside the zones.
Gross Income Taxation. In lieu of all other national and local taxes, license fees, imposts and assessments, except real estate taxes and such fees as may be imposed by the TIEZA, a new enterprise shall pay a tax of five percent (5%) on its gross income earned, which shall be distributed as follows:
One-third to be proportionally allocated among affected LGUs;
One-third to the national government; and
One-third to the TIEZA for the funding of its operations and its programs in the TEZs, which shall include the protection, maintenance and enrichment of the environment, tangible cultural and historical heritage, and the intangible cultural heritage of communities within and surrounding the TEZs.
Gross income as used herein is defined under Section 27(A) of the NIRC, and further defined under relevant rules and regulations.
Capital Investment and Equipment. Subject to rules and regulations which properly define capital investments and equipment necessary for various kinds of tourism enterprises, registered enterprises shall be entitled to an exemption of one hundred percent (100%) of all taxes and customs duties on importations of capital investment and equipment.
Transportation and Spare Parts. Importation of transportation and the accompanying spare parts of new and expanding registered enterprises shall be exempt from customs duties and national taxes: Provided, That they are not manufactured domestically in sufficient quantity, of comparable quality and at reasonable prices, and that they are reasonably needed and will be used exclusively by an accredited tourism enterprise.
Goods and Services. Subject to rules and regulations which properly define goods and services necessary for various kinds of tourism enterprises, registered enterprises shall be entitled to the following:
Importation of goods actually consumed in the course of services actually rendered by or through registered enterprises within a TEZ shall enjoy one hundred percent (100%) exemption from all taxes and customs duties: Provided, however, That no goods shall be imported for the purpose of operating a wholesale or retail establishment in competition with the DFPC; and
A tax credit equivalent to all national internal revenue taxes paid on all locally-sourced goods and services directly or indirectly used by the registered enterprise for services actually rendered within the TEZ.
Social Responsibility Incentive. A registered enterprise shall be entitled to a tax deduction equivalent to a reasonable percentage, not exceeding fifty percent (60%), of the cost of environmental protection or cultural heritage preservation activities, sustainable livelihood programs for local communities, and other similar activities.
Non-fiscal Incentives Available to TEZ Operators and Registered Tourism Enterprises.
SEC. 87. Non-fiscal Incentives Available to TEZ Operators and Registered Tourism Enterprises. — The following incentives may, in the discretion of the TIEZA Board, be granted to registered tourism enterprises within TEZs:
Employment of Foreign Nationals. A registered enterprise may employ foreign nationals in executive, supervisory, technical or advisory positions for such reasonable periods and under such terms as may be provided by the TIEZA Board, with due regard for the proper protection and representation of foreign investments in registered enterprises, and the need to ensure easy travel into and out of the Philippines by such nationals and their immediate families;
Special Investor’s Resident Visa. Under such terms as may be provided by the TIEZA Board, a foreign national who shall have made an investment with a value of at least Two hundred thousand dollars (USD200,000.00) in a registered enterprise shall be entitled to a special investor’s resident visa. With such visa, the foreign national shall be entitled to reside in the Philippines while his or her investment subsists. Subject to regulations to be issued by the Bureau of Immigration (BI), the TIEZA shall issue working visas renewable every two (2) years to foreign personnel and other aliens, possessing highly-technical skills which no Filipino within the TEZ possesses, after they have secured Alien Employment Permits (AEP) from the DOLE. The names of aliens granted permanent resident status and working visas by the TIEZA shall be reported to the BI within thirty (30) days after issuance thereof;
Foreign Currency Transactions. Subject to the provisions of Section 72 of Republic Act No. 7653, as amended, otherwise known as the New Central Bank Act:
Repatriation of Investments. In the case of foreign investments, the right to repatriate the entire proceeds of the liquidation of the investment in the currency in which the investment was originally made and at the exchange rate prevailing at the time of repatriation.
Remittance of Foreign Exchange. The right to remit earnings from a foreign investment in the currency in which the investment was originally made and at the exchange rate prevailing at the time of remittance.
Foreign Loans and Contracts. The right to remit at the exchange rate prevailing at the time of remittance such sums as may be necessary to meet the payments of interest and principal on foreign loans and foreign obligations arising from technological assistance contracts.
Requisition of Investment. There shall be no requisition of the property of registered enterprises, except in the event of war or national emergency, and only for the duration thereof. In any case, the affected person shall be entitled to just compensation, and shall have the right to repatriate such compensation as provided in paragraph (c) above; and
Lease and Ownership of Land. Without prejudice to existing laws regulating the ownership of land by individuals and corporations, and consistent with the provisions of Republic Act No. 7652, otherwise known as the Investor’s Lease Act, lands and buildings in each TEZ may be leased to foreign investors for a period not exceeding fifty (50) years, renewable once for a period of not more than twenty-five (25) years. The leasehold right acquired under long-term contracts may be sold, transferred or assigned, subject to the conditions set forth under the Investor’s Lease Act.
SUBCHAPTER V-B. TOURISM ENTERPRISES OUTSIDE TEZS
Incentives Available to Tourism Enterprises Outside TEZs.
SEC. 88. Incentives Available to Tourism Enterprises Outside TEZs. — The grant of fiscal and other incentives to tourism enterprises not located within TEZB shall be governed by the following provisions:
Upon compliance with the requirements provided by law, they shall be entitled to avail of any economic incentives found under existing laws, such as Executive Order No. 226 (1987), otherwise known as the Omnibus Investments Code; Republic Act No. 7042, as amended by Republic Act No. 8179, otherwise known as the Foreign Investments Act; the Special Economic Zone Act; and the Bases Conversion and Development Act, among others, subject to the last paragraph of Section 86(a), at the option of the said enterprises.
Subject to rules and regulations jointly promulgated by the Department and the TIEZA, an existing accommodation establishment not located within a TEZ shall be entitled to claim an income tax holiday for up to six (6) years for any significant expansion, renovation or upgrade in its facilities in relation to the amount of the original investment. They shall also be entitled to import capital equipment free of taxes and duties when necessary for such expansion, renovation or upgrade.
Tourism enterprises may avail of incentives under the Omnibus Investments Code: Provided, That:
Tourism activities shall always be included in the Investment Priorities Plan;
Rules and regulations concerning the grant of incentives to tourism enterprises shall be jointly formulated by the Board of Investments and the Department;
The income tax holiday provided under Section 39.1 of the Omnibus Investments Code shall also apply to existing accommodation enterprises undergoing substantial capital infusion for expansion or substantial upgrade of facilities; and
Accredited tourism enterprises shall be entitled to import transportation and accompanying spare parts free of taxes and duties: Provided, however, That such transportation shall be exclusively used by the enterprise in its operations, and: Provided, further, That such are not manufactured domestically in sufficient quantity, comparable quality and prices.
Tourism enterprises located in special economic zones, created under the Special Economic Zone Act or by special charter, shall continue to be governed by the same.
The incentives offered under this Act shall be without prejudice to the availment of other incentives provided under other laws, such as, but not limited to, those concerning infrastructure, or micro-, small- and medium enterprises. However, where such laws provide for similar incentive schemes as those contained herein, the investor may elect to avail of the scheme provided only under one particular law, decree or issuance.
Source: Supreme Court E-Library, Republic of the Philippines. Philippine laws are public documents (works of the government).
