Duterte signs EOs granting incentives

BOARD of Investments-registered companies will continue to enjoy duty-free importation of capital equipment, spare parts and accessories, according to Executive Order (EO) No. 22 signed by President Rodrigo R. Duterte.

Signed on April 28, EO 22 -- a copy of which was released to the media on Monday – directs the reduction of rates of duty on capital equipment imported by BOI-registered “new and expanding” enterprises.

According to the EO, the extension of the zero percent duty on capital equipment imported by BOI- registered firms was made upon the “ad referendum” endorsement of the National Economic and Development Authority ( NEDA) Board last April 28.

The measure will also “further enhance industry competitiveness in line with the Philippine Development Plan (PDP) 20172022,” the new EO read in part.

The extension of the zero percent duty importation covers capital equipment, spare parts and accessories classified under the Customs Modernization and Tariff Act (CMTA) provided that these are “not manufactured domestically in sufficient quantity, of comparable quality, and at reasonable prices.”

Companies cannot use those equipment, spare parts, and accessories beyond what they stipulated under the registration with the regulator.

“Considering that importation of capital equipment is one of the major cost burdens of business enterprises in their start-up operations and expansion, there is a need to extend the zero duty on importation on capital equipment, spare parts, and accessories currently being enjoyed by BOI-registered enterprises,” the new EO stated.

EO 22 replaced EO 70, which was issued by former president Benigno S.C. Aquino III in 2012 to provide for a zero percent duty on certain articles imported by BOI- registered firms for a period of five years. That Aquino- signed directive lapsed last May 9.

EO 22 is effective for five years or until a law amending EO 226 (s. 1987), or the Omnibus Investments Code of 1987, is enacted.

A bill seeking to rationalize fiscal incentives to change the Omnibus Investments Code had roughly sailed in the past Congress, but there are plans to revive it under the Duterte administration.

IMPLEMENTING RULES

Ceferino S. Rodolfo, Trade undersecretary and BoI managing head, said the grant of the incentive is an important measure in promoting and boosting more “high-value, impactful, and socially relevant” investment projects in the country.

“The measure also augur well with the agency’s 2017 Investment Priorities Plan (IPP) which encourages more innovation-driven and job-generating investment projects that will eventually lead us to modernize the Philippine economy,” he said in a statement yesterday.

The duty exemption will be granted only after the BoI issues a certificate of authority to the importer.

The BoI, which was designated to lay down the implementing rules and regulation of the order, did not immediately respond when asked whether the incentives would benefit all the enterprises enumerated under the agency’s investment priorities plan (IPP).

The IPP, a list of priority investment activities that may be granted incentives, has given emphasis on the following:

- innovation-driven and job-generating businesses;

- inclusive business for agribusiness and tourism;

- broadened coverage of manufacturing;

- information technology (IT) and IT-enabled services for the domestic market and telecommunications services for new market players;

- environment and climate changerelated projects;

- LGU-initiated PPP projects; drug rehabilitation centers;

- state-of-the-art engineering, procurement and construction (EPC) services.

The IPP has also lifted the geographical restrictions for most agriculture and tourist accommodation facilities.

OTHER EOS SIGNED

Meanwhile, Mr. Duterte also signed EO 20 modifying the nomenclature and rates of import duty on “various” products under CMTA. He also inked EO no. 21, which carries the same directive for certain information technology ( IT) products under Section 1611 of the CMTA.

EO 21 was signed to implement the Philippines’ tariff commitments under the World Trade Organization (WTO) – Information Technology Agreement (ITA), the document said.

The Philippines, which became a party to the ITA on April 1, 1997, itself has had a zero tariff on computer hardware, peripherals, software and similar imports since January 2000, according to the US Office of Technology and Electronic Commerce Web site.

In 2012, members recognized that technological innovation had advanced to such an extent that many new categories of IT products were not covered by the existing agreement, resulting in negotiations to expand the ITA’s coverage.

In 2015, 80 WTO countries agreed to remove tariffs on 201 products, allowing the Philippines to access more than 90% of international markets.

“The articles specifically listed… shall be subject to MFN ( MostFavored Nation) rates of import duty in accordance with the schedule indicated opposite each article. The rates of import duty on tariff headings and subheadings which are not enumerated… shall remain in force and effect,” EO 21 said.

“Upon the effectivity of this order, all articles which are specifically listed in the aforementioned annex and are entered into, or withdrawn from warehouses in the Philippines for consumption, shall be levied MFN rates of duty as therein prescribed,” it added.