BIR affirms tax incentives for tourism enterprise zones

The Bureau of Internal Revenue (BIR) has affirmed that incentives for Tourism Enterprise Zones may be enjoyed by investors even beyond 2019 or until these incentives are fully realized or availed.

Commissioner Caesar R. Dulay recently issued this ruling on the clarification sought by the Tourism Infrastructure and Enterprise Zone Authority (TIEZA) on incentives under the Tourism Act of 2009 or RA 9593.

This clarification came in light of the Revenue Regulations issued by the BIR in November, 2016, on the effective administration of tax incentives for TEZs for a period of 10 years or until 2019, thus the so-called sunset provision.

To address queries of investors in tourism as to the availment of incentives beyond the sunset provision, recently appointed TIEZA General Manager/Chief Operating Officer Pocholo J.D. Paragas sought clarification from BIR and the ruling came out last 30 May 2017.

"We want to immediately put this issue to rest. This clarification will greatly enhance investors’ confidence to develop Tourism Enterprise Zones and to attract locators to put up tourism enterprises inside. The time to invest in tourism is now,” said Paragas.

He further stated that TIEZA through its TEZ Sector will continue to engage tourism investment groups as he believes in the significant contributions of tourism in the national economy and the huge potential of tourism to provide inclusive growth in the communities.

The incentives under Tourism Act of 2009 include a six-year income tax holiday (ITH) that may be extended for another six years, 5 percent preferential tax on gross income in lieu of national taxes except for real property tax and fees of TIEZA; 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 TIEZAregistered activities; exemption from value-added tax (VAT) and excise tax goods imported by TIEZA-registered activities; tax credit equivalent to taxes paid on locally sourced goods; and tax deduction of up to 50 percent of cost of environmental protection and cultural heritage preservation activities, as well as of sustainable livelihood programs of the registered tourism enterprises (RTEs).

Tourism enterprises are facilities, services and attractions involved in tourism, such as, but not limited to, travel and tour services; tourist-transport services; tour guides; services involving adventure sports; convention organizers; establishments providing accommodations i.e. hotels, resorts, apartelles, tourist inns, motels, pension houses and home-stay operators; tourism estate-management services, restaurants, shops and department stores, sports and recreational centers, spas, museums and galleries, theme parks, convention centers, and zoos.