Omnibus Investment Code of 1987 (EO 226)

Qualifications
 Engage in area of activity listed in the current Investment Priorities Plan (IPP)
 Register with the Board of Investment (BOI)

Fiscal incentives
 Exempt from the payment of income taxes reckoned from the scheduled start of
commercial operations (SCO)
1. Date reflected in the registration
2. .
3. Actual date of commercial production

New projects
 With a pioneer status- 6 years
 Non-pioneer status- 4years

New/ expansion projects in CDAs regardless of status

-6 years

Expansion projects
-3 years

Modernization projects
- 3years

 Income Tax Holiday may be extended for an extra year for each of the following
cases:

1. Ratio of total imported and domestic capital equipment to number of

workers do not exceed US $10,000 to one worker (if met, 1year extension,
then…)
2. Average cost of…
3. Net foreign exchange savings/ earnings amount to at least US $500,000
annually during the first 3 years of operation

Note:
It is not allowed to avail all three at once but condition no. 3 and any of the
other 2 conditions may be availed at once.

ITH qualified for ITH is limited to income directly attributable to the eligible
revenue granted from the beginning project (regular activity)

 Exemption from taxes and duties on imported spare parts

-wharfage dues and export tax, duty
.
.
.
 Import-exemption
Local- tax credit

BIR Ruling No. 317-2013 dated 08/12/13

-Non-pioneering

CWT- exempt
VAT- non-exempt
DST- non-exempt

Entitlement to ITH automatic? NO

Still a withholding agent for its income payments subject to withholding tax? YES

Special Economic Zone Act of 1995

Qualifications
 Physically located inside an ecozone
 Registered with the PEZA

Economic Zone

Developer’s/ Utilities Facilities Service

operators enterprises providers provider
(customer’s
category)
Expert
Logistic
producers and
services
service
exporters

Developers/ operators
-owner of land

Utilities enterprises
-provide water/ electricity

Facilities providers
-provide buildings

Logistic services
-provide warehouse/ delivery

Export producers and service exporters

-manufacture
*focus of the discussion

ITH GIT
Enterprises 6 years from commercial 5% after the year of the ITH
operations
-new registered pioneer
firms
4 years from commercial
operations
-new registered non-
pioneer firms
3 years from commercial
operations
-expanding registered firms

Other Fiscal Incentives

Local-tax credit
Import-exemption

Additional deduction for training expenses (1/2 of the amount incurred)

5% GIT (except FWT, FBT):

3%
-national government
-includes all national taxes except those withhold at source

2%
-local treasurer’s office
-includes all local taxes, except RPT on developers

Section 1 RR No. 20-01

Concept of regular activity

-only those listed as subject to 5% GIT
PEZA memo order no. 2005-032

1. Sale of Scrap items

2. Forex Gains
-5% GIT if related activities only gains are taxable

realized forex loss

-not deductible under 5% GIT of regular activities
-but deductible under RCIT

MCIT
-realized forex loss is activities

PEZA: RMC 74-99

-30% sales to Customs Territory (GIT)
-31% sales to Customs Territory (excess RCIT)

Freeport Zones: RMC 50-07

30% sales to Customs Territory (GIT)
31% sales to Customs Territory (RCIT all)

CTA EB Case No. 1207 (CTA Case no. 8179)Dated Feb 3, 2016

Under the ITH Regime

Sale of services

Product
registered or
not
Zero rated YES Export? YES Product
registered
Product
Product registered or
NO
registered or not
not
Zero rated To other PEZA YES exempt
YES
registered
enterprises

Product
registered or
Product NO not
registered
12% VAT Custom’s exempt
territory
BIR Ruling NO. 115-2013 dated March 22,2013

X Co.
-ecozone export enterprises duly registered with PEZA
-owns factory and building located at Mactan ecozone which are used in its registered
activity
-X co. sold the factory and building to another PEZA registered entity

Is the sale of factory and office building subject to 30% RCIT, VAT and DST? Yes, No, Yes