Section 1
SECTION 1. Section seven of Republic Act Numbered Fifty-one hundred eighty-six is hereby amended by adding a new subsection and amending paragraphs (d), (e) and (h) hereof, to read as follows: "SEC. 7. Incentives to a Registered Enterprise. — A registered enterprise, to the extent engaged in a preferred area of investment, shall be granted the following incentive benefits: * * * * * * * "(d) Tax Exemption on Imported Capital Equipment. Within seven years from the date of registration of the enterprise, importation of machinery and equipment, and spare parts shipped with such machinery and equipment, shall not be subject to tariff duties and compensating tax: Provided, That said machinery, equipment, and spare parts: (1) are not manufactured domestically in reasonable quantity and quality at reasonable prices; (2) are directly and actually needed and will be used exclusively by the registered enterprise in the manufacture of its products, unless prior approval of the Board is secured for the part-time utilization of said equipment in non-registered operations to maximize usage thereof; (3) are covered by shipping documents in the name of the registered enterprise to whom the shipment will be delivered direct to customs authorities; (4) the prior approval of the Board was obtained by the registered enterprise before the importation of such machinery, equipment and spare parts; and (5) the registered enterprise chooses not to avail of the privileges granted by Republic Act Numbered Thirty-one hundred twenty-seven, as amended. If the registered enterprise sells, transfers or disposes of these machinery, equipment and spare parts without the prior approval of the Board within five (5) years from the date of acquisition, the registered enterprise shall pay twice the amount of the tax exemption given it. However, the Board shall allow and approve the sale, transfer, of the disposition of the said items within the said period of five (5) years if made: (1) to another registered enterprise; (2) for reasons of proven technical obsolescence; (3) for purpose of replacement to improve and/or expand the operations of the enterprise. "(e) Tax Credit on Domestic Capital Equipment. — A tax credit equivalent to one hundred per cent (100%) of the value of the compensation tax and customs duties that would have been paid on the machinery, equipment and spare parts had these items been imported shall be given to the registered enterprise who purchases machinery, equipment and spare parts from a domestic manufacturer, and another tax credit equivalent to fifty per cent (50%) thereof shall be given to the said manufacturer: Provided, (1) That the said machinery, equipment and spare parts are directly and actually needed and will be used exclusively by the registered enterprise in the manufacture of its products, unless prior approval of the Board is secured for the part-time utilization of said equipment in non-registered operations to maximize usage thereof; (2) that the prior approval of the Board was obtained by the local manufacturer concerned; and (3) that the sale is made within seven years from the date of registration of the registered enterprise. If the registered enterprise sells, transfers or disposes of these machinery, equipment and spare parts without the prior approval of the Board within five (5) years from the date of acquisition, then it shall pay twice the amount of the tax credit given it. However, the Board shall allow and approve the sale, transfer, or disposition of the said items within the said period of five (5) years if made (1) to another registered enterprise; (2) for reasons of proven technical obsolescence; or (3) for purposes of replacement to improve and/or expand the operations of the enterprise." "(h) Deduction for Expansion Reinvestment. — When a registered enterprise reinvests its undistributed profit or surplus, whether from registered operations or not, by actual transfer thereof to the capital stock of the corporation for procurement of machinery, equipment and spare parts previously approved by the Board under subsections ' d ' and ' e ' hereof or for the expansion of machinery and equipment used in production or for the construction of the buildings, improvements or other facilities for the. installation of the said machinery and equipment, the amount so reinvested, to the extent of twenty-five per cent (25%), thirty-seven and one-half per cent (37½%), fifty per cent (50%), in case of non-pioneer projects and to the extent of fifty per cent (50%), seventy-five per cent (75%), one hundred per cent (100%) in the case of pioneer projects, the appropriate percentage to be determined by the Board for each industry taking into account the relative risk, technology, transfer and fall-out, export potential,, incremental labor, use of locally manufactured machinery and equipment and domestic raw materials, shall be allowed as a deduction from its taxable income in the year in which such reinvestment was made: Provided, (1) That prior approval of the Board of such reinvestment was obtained by the registered enterprise planning such reinvestment and (2) that the registered enterprise does not reduce its capital stock represented by the reinvestment within seven (7) years from the date such reinvestment was made. In the event the registered enterprise does not order the machinery and equipment within two (2) years from the date the reinvestment was made or reduces its capital stock represented by the reinvestment within a period of seven (7) years from the date of reinvestment, a recomputation of the income tax liability therefor shall be made for the period when the deduction was made, and the proper taxes shall be assessed and paid with interest." "(k) Deduction for Labor Training Expenses. — An additional deduction from taxable income of one half of the value of labor training expenses incurred for upgrading the productivity and efficiency of unskilled labor shall be granted to a registered enterprise: Provided, That such training program is duly approved by the appropriate government agency or in the absence thereof by the Board: And provided, further, That such deduction shall not exceed ten per cent (10%) of direct labor wage."