Incentive rules out for tourism zones

THE BUREAU of Internal Revenue (BIR) has released longawaited rules for the grant of tax perks to tourism-oriented investors up to 2019, providing support for a sector that the government has tagged as a pillar of economic growth.

BIR Revenue Regulations No. 7-2016, signed Nov. 15 and published in a newspaper yesterday, spells out fiscal incentives that can be given to firms operating inside tourism enterprise zones (TEZs), as provided by Republic Act (RA) No. 9593, or the Tourism Act of 2009.

PERKS

These are:

• a six-year income tax holiday (ITH) that may be extended for another six years;

• as an ITH alternative, a 5% preferential tax on gross income in lieu of national taxes except for real property tax and fees of the Tourism Infrastructure and Enterprise Zone Authority (TIEZA);

• in lieu of ITH or the 5% preferential gross income tax, a net operating loss carry over (NOLCO) scheme;

• import tax exemptions for capital goods and equipment needed for TIEZA-registered activities;

• import tax exemptions for transport equipment and spare parts needed for TIEZA- registered activities;

• exemption from value-added tax ( VAT) and excise tax goods imported for TIEZA- registered activities;

• tax credit equivalent to national taxes paid on local goods and services procured by RTEs for activity in TEZs, provided that input VAT will be allowed as credit against only output VAT;

• and tax deduction of up to 50% of cost of environmental protection and cultural heritage preservation activities, as well as of sustainable livelihood programs of the registered tourism enterprises (RTEs).

Tourism businesses outside TEZs may avail of ITH, tax exemption on importation of capital investment and equipment, as well as NOLCO if they are allowed to do so by TIEZA.

ONLY UP TO 2019

The revenue regulation, however, says the incentive scheme “shall be in effect for a period of 10 years from the effectivity of RA 9593” in mid-2009.

The new incentives scheme takes effect on Dec. 6 — 15 days after it was published in a newspaper on Monday.

The BIR’s new rules come seven years since the passage of the Tourism Act and effectively open up the granting of incentives to locators in TEZs designated by TIEZA.

RTEs include travel and tour services, tour guides, adventure sports services such as scuba diving and mountaineering, convention organizers, hotels and accommodation places, restaurants, shops and stores, spas, museums, theme parks, and zoos, to name a few.

The government has identified agribusiness and tourism among sectors that will be instrumental in lifting more Filipinos in the

countryside out of poverty as the country’s economic expansion continues to sizzle in the next six years.

‘BIG BOOST’

Benedict R. Tugonon, president of the Tax Management Association of the Philippines, described the release of the incentives package as a “big boost” for the country’s tourism industry.

“The regulations will allow our tourism establishments to modernize and upgrade their equipment with the tax and duty exemption on importation of capital investment and equipment,” Mr. Tugonon said in a text message when sought for comment.

“The income tax holiday and the option to pay a gross tax of 5% will allow the industry players to bring down the room rates and the transportation costs and make the Philippines more competitive or even cheaper to visit compared to our neighbors in Asia,” he added.

“Hopefully the incentives will allow the tourism industry to really expand and generate more businesses and employment which will result eventually to more taxes to the government.”

All companies looking to avail of any incentives must ask for a certificate of entitlement from TIEZA each year, which must be attached to the income tax returns that are submitted to the BIR.

TIEZA- accredited firms are also mandated to regularly report their use of incentives, as required under Republic Act No. 10708, or the Tax Incentives Management and Transparency Act that was enacted in December last year.

“Tourism enterprises availing of the incentive scheme under RA No. 9593 shall not be qualified to avail of similar or identical incentives schemes under other laws, decrees, presidential issuances, rules and regulations,” the BIR added.

The newly released rules also provide that TIEZA- accredited locators that have been found to have violated the terms of their registration will have to pay back taxes computed up to three years directly preceding the date of promulgation of the ruling on their violation.