EO extends duty-free importation of equipment, spare parts by BOI firms
Companies registered with the Board of Investments (BOI) can still enjoy duty-free importation of capital equipment, spare parts and accessories based on an executive order signed by President Duterte.
The one-year extension of the zero percent duty importation, contained in Executive Order (EO) No. 57, aims to further enhance industry competitiveness in line with the Philippine Development Plan 2017 to 2022.
“Considering that importation of capital equipment remains as one of the major cost burdens of business enterprises in their start-up and expansion, there is a need to extend the zero percent duty on capital equipment, spare parts and accessories currently being enjoyed by BOI-registered enterprises," the presidential order read.
"The grant of duty-free importation of capital equipment remains to be an important fiscal incentive in promoting investments in the Philippines considering the global competition for foreign direct investments," it added.
The National Economic and Development Authority earlier recommended the reduced rates on duty on imported equipment after the EO 22 on the business incentive issued in 2017 expired last May 18.
Under the new EO, the zero percent duty shall be applied to importations by BOI-registered new and expanding enterprises of capital equipment, spare parts and accessories upon the BOI issuance of a certificate of authority.
The imported capital equipment must comply with conditions, such as they are not manufactured domestically in sufficient quantity, of comparable quality, and at reasonable prices; and they are reasonably needed and will be used exclusively by their enterprise in its registered activity.
The companies are also prohibited from selling, transferring or disposing the imported equipment without prior BOI approval within five years from the date of importation.
Otherwise, they will be made to pay twice the amount of the foregone duty or R500,000 whichever is higher without prejudice to other applicable penalties.
EO 57, signed by Executive Secretary Salvador Medialdea last June 22, will take effect immediately after publication in a newspaper.
It will be valid for one year or until a law amending EO 226, also known as the Omnibus Investments Code of 1987, is enacted whichever comes earlier.
Duty-free importation of capital equipment has been one of the incentives granted by the government to investors.
Aside from this incentive, BOIregistered companies also enjoy income tax holiday for a maximum of 8 years, depending on the status of project whether it is pioneer or non-pioneer.
Other incentives include double tax deduction for training expenses.
Normally, capital equipment expenses account for the bulk of a company’s total investment.
Thus, the duty-free perk to investors is a critical measure to help the viability of a new project.