however, That during the period within which this incentive is

availed of by the expanding firm it shall not be entitled to

additional deduction for incremental labor expense.

February 24, 1995 "(3) The provision of Article 7(14) notwithstanding,

registered firms shall not be entitled to any extension of this
incentive.
REPUBLIC ACT NO. 7918
"(b) Additional Deduction for Labor Expense. — For the
first five (5) years from registration a registered enterprise shall be
AN ACT AMENDING ARTICLE 39, TITLE III OF EXECUTIVE ORDER NO. 226, allowed an additional deduction from the taxable income of fifty
OTHERWISE KNOWN AS THE OMNIBUS INVESTMENTS CODE OF 1987, AS percent (50%) of the wages corresponding to the increment in the
AMENDED, AND FOR OTHER PURPOSES number of direct labor for skilled and unskilled workers if the project
SECTION 1. Article 39, Title III of Executive Order No. 226, meets the prescribed ratio of capital equipment to number of workers
otherwise known as the Omnibus Investments Code of 1987, as amended, set by the Board: Provided, That this additional deduction shall be
is hereby further amended to read as follows: doubled if the activity is located in less developed areas as defined in
Article 40.
cd i

"Art. 39. Incentives to Registered Enterprises. — All

registered enterprises shall be granted the following incentives to the "(c) Tax and Duty Exemption on Imported Capital
extent engaged in a preferred area of investment: casia Equipment and its Accompanying Spare Parts. — New,
expanding/modernizing enterprise which have been registered with
"(a) Income Tax Holiday. — the Board of Investments on or before December 31, 1994 shall be
"(1) For six (6) years from commercial operation for exempt to the extent of one hundred percent (100%) of national
pioneer firms and four (4) years for non-pioneer firms, new internal revenue taxes and customs duties on importations of
registered firms shall be fully exempt from income taxes levied machinery, equipment and accompanying spare parts within the
by the national government. Subject to such guidelines as may prescribed period under its law of registration or until December 31,
be prescribed by the Board, the income tax exemption will be 1997 whichever comes first: Provided, however, That the enterprise
extended for another year in each of the following cases: which shall register after December 31, 1994 shall be subject to the
provisions of Republic Act No. 7716, and three percent (3%) customs
"(i) The project meets the duties up to December 31, 1997: Provided, finally, That the
prescribed ratio of capital equipment to number importation of machinery, equipment and accompanying spare parts
of workers set by the Board; shall comply with the following conditions:
"(ii) Utilization of indigenous raw "(1) They are not manufactured domestically in
materials at rates set by the Board; sufficient quantity, or comparable quality, and at reasonable
"(iii) The net foreign exchange prices;
savings or earnings amount to at least "(2) They are reasonably needed and will be used
US$500,000 annually during the first three (3) exclusively by the registered enterprise in its registered
years of operation. cdt
activity, unless prior approval of the Board is secured for the
part-time utilization of said equipment in a non-registered
"The preceding paragraph notwithstanding, no
activity to maximize usage thereof or the proportionate taxes
registered pioneer firm may avail of this incentive for a period
and duties are paid on specific equipment and machinery
exceeding eight (8) years.
being permanently used for non-registered activities; and
"(2) For a period of three (3) years from commercial
'(3) The approval of the Board was obtained by the
operation, registered expanding firms shall be entitled to an
registered enterprise for the importation of such machinery,
exemption from income taxes levied by the national
equipment and accompanying spare parts.
government proportionate to their expansion under such terms
and conditions as the Board may determine: Provided, "In granting the approval of the importations under this
paragraph, the Board may require international canvassing but if the
total cost of the capital equipment or industrial plant exceeds
US$5,000,000, the Board shall apply or adopt the provisions of unless importation is otherwise covered under subsections (c) and
Presidential Decree No. 1764 on international competitive bidding. casia (1) of this Article: Provided, further, That such consigned equipment
shall be for the exclusive use of the registered enterprise.
"If the registered enterprise sells, transfers or disposes of
these machinery, equipment and spare parts without prior approval of "If such equipment is sold, transferred or otherwise, Article
the Board within five (5) years from date of acquisition, the registered 39(c)(3) shall apply. Outward remittance of foreign exchange
enterprise and the vendee, transferee, or assignee shall be solidarily covering the proceeds of such sale, transfer or disposition shall be
liable to pay twice the amount of the tax exemptions given it. The allowed only upon prior Bangko Sentral ng Pilipinas approval.
Board shall allow and approve the sale, transfer or disposition of the "(g) Employment of Foreign Nationals. — Subject to the
said items until December 31, 1997 or December 31, 1999 as the provisions of Section 29 of Commonwealth Act No. 613, as
case may be if made: amended, a registered enterprise may employ foreign nationals in
"(aa) To another registered enterprise or registered supervisory, technical or advisory positions for a period not
domestic producer enjoying similar activities; exceeding five (5) years from its registration, extendible for limited
periods at the discretion of the Board: Provided, however, That when
"(bb) For reasons of proven technical the majority of the capital stock of a registered enterprise is owned by
obsolescence; or foreign investors, the positions of president, treasurer, and general
"(cc) For purpose of replacement to improve and/or manager or their equivalents may be retained by foreign nationals
expand the operations of the registered enterprise. beyond the period set forth within.

"(d) Tax Credit on Domestic Capital Equipment. — A tax "Foreign nationals under employment contract within the
credit equivalent to one hundred percent (100%) of the value of the purview of this incentive, their spouses and unmarried children under
national internal revenue taxes and customs duties that would have twenty-one (21) years of age, who are not excluded by Section 29 of
been waived on the machinery, equipment and spare parts, had Commonwealth Act No. 613, as amended, shall be permitted to enter
these items been imported shall be given to the new and expanding and reside in the Philippines during the period of employment of such
enterprise registered with the Board of Investments as of December foreign nationals.cd i

31, 1994 which purchases machinery, equipment and spare parts

"A registered enterprise shall train Filipinos as understudies of
from a domestic manufacturer: Provided, (1) That the said
foreign nationals in administrative, supervisory and technical skills
equipment, machinery and spare parts are reasonably needed and
and shall submit annual reports on such training to the Board.
will be used exclusively by the registered enterprise in its registered
activity, unless prior approval of the Board is secured for the part-time "(h) Exemption on Breeding Stocks and Genetic Materials.
utilization of said equipment in a non-registered activity to maximize — The importation of breeding stocks and genetic materials within
usage thereof; (2) That the equipment would have qualified for tax ten (10) years from the date of registration of commercial operation of
and duty exemption under paragraph (c) hereof; (3) That the the enterprise shall be exempt from all taxes and duties: Provided,
approval of the Board was obtained by the registered enterprise; and That such breeding stocks and genetic materials are: (1) not locally
(4) That the purchase is made on or before December 31, 1997 or available and/or obtainable locally in comparable quality and at
December 31, 1999 as the case may be. If the registered enterprise reasonable prices; (2) reasonably needed in the registered activity;
sells, transfers, or disposes of these machinery, equipment and spare and (3) approved by the Board.
parts, the provision in the preceding paragraph for such disposition
"(i) Tax Credit on Duty Portion of Domestic Breeding
shall apply.
Stocks and Genetic Materials. — A tax credit equivalent to one
"(e) Simplification of Customs Procedures. — Customs hundred percent (100%) of the value of national internal revenue
procedures for the importation of equipment, spare parts, raw taxes and customs duties that would have been waived on the
materials and supplies, exports of processed products by registered breeding stocks and genetic materials had these items been
enterprises shall be simplified by the Bureau of Customs. acd imported shall be given to the registered enterprise which purchases
breeding stocks and genetic materials from a domestic producer:
"(f) Unrestricted Use of Consigned Equipment. — Provided, (1) That said breeding stocks and genetic materials would
Provisions of existing laws notwithstanding, machinery, equipment have qualified for tax and duty-free importation under the preceding
and spare parts consigned to any enterprise shall not be subject to paragraph; (2) That the breeding stocks and genetic materials are
restrictions as to period of use of such machinery, equipment and reasonably needed in the registered activity; (3) That approval of the
spare parts: Provided, That the appropriate re-export bond is posted
 Board has been obtained by the registered enterprise; and (4) That SECTION 4. Effectivity Clause. — This Act shall have retroactive
the purchase is made within ten (10) years from the date of effect to May 5, 1994 fifteen (15) days following its publication in a
registration of commercial operation of the registered enterprise. newspaper of general circulation.
"(j) Tax Credit for Taxes and Duties on Raw Materials. — Approved: February 24, 1995
Every registered enterprise shall enjoy a tax credit equivalent to the
Published in Malaya on March 26, 1995.
national internal revenue taxes and customs duties paid on the
supplies, raw materials and semi-manufactured products used in the
manufacture, processing or production of its export products and
forming part thereof; Provided, however, That the taxes on the
supplies, raw materials and semi-manufactured products
domestically purchased are indicated as a separate item in the sales
invoice.casia

"Nothing herein shall be construed as to preclude the Board

from setting a fixed percentage of exports sales as the approximate
tax credit for taxes and duties of raw materials based on an average
or standard usage for such materials in the industry.
"(k) Access to Bonded Manufacturing/Trading System. —
Registered export-oriented enterprises shall have access to the
utilization of the bonded warehousing system in all areas required by
the project subject to such guidelines as may be issued by the Board
upon prior consultation with the Bureau of Customs.
"(l) Exemption from Taxes and Duties on Imported Spare
Parts. — Importation of required supplies and spare parts for
consigned equipment or those imported tax and duty-free by a
registered enterprise with a bonded manufacturing warehouse shall
be exempt from customs duties and national internal revenue taxes
payable thereon: Provided, however, That such spare parts and
supplies are not locally available at reasonable prices, sufficient
quantity and comparable quality: Provided, finally, That all such spare
parts and supplies shall be used only in the bonded manufacturing
warehouse of the registered enterprise under such requirements as
the Bureau of Customs may impose.
"(m) Exemption from Wharfage Dues and Export Tax,
Duty, Imposts and Fee. — The provision of law to the contrary
notwithstanding, exports by a registered enterprise of its non-
traditional export products shall be exempted from any wharfage
dues, and any export tax, duty impost and fee."
SECTION 2. All other provisions of Executive Order No. 226 and
Republic Act No. 7369, also known as "An Act Granting Tax and Duty
Exemption and Tax Credit on Capital Equipment," not otherwise affected
by the provisions of this Act shall remain in full force and effect. cdt

SECTION 3. All other laws, decrees, orders, issuances and rules

and regulations or parts thereof inconsistent with this Act, are hereby
repealed or modified accordingly.