Tax incentives schemes to be harmonized

MANILA, Philippines – Income tax incentives granted to investors regardless of location would be reduced while the five percent on gross income earned (GIE) would be capped to a maximum of 25 years at reduced rate.

This was reached by the Department of Finance and the Department of Trade and Industry as both line agencies are going to submit a unified position on the proposed Fiscal Investments Reform bill.

Documents showed that both agencies have come up with three options on the income tax holiday (ITH) and GIE incentives for registered export-zone companies.

The first option is to grant ITH for six years, extendible for two years for those who will locate in the less developed areas and thereafter, 5 percent on GIE for the remaining years.

The second option is a 2-5 percent GIE for a period of 25 years and option 3 is a reduced ITH of 15 percent for 25 years.

For registered export enterprises, both government agencies have agreed to impose a sunset clause on incentives of a maximum of 25 years.

This move is aimed at harmonizing incentives and to remove any location bias in favor of ecozones or freeports. At present, enterprises registered with the Philippine Economic Zone Authority (PEZA) enjoy a maximum of 8 years ITH and perpetual 5 percent GIE upon expiry of the ITH.

Other investment promotion agencies Clark Freeport Zone, Subic Bay Freeport, Poro Point, Bataan Technology Park and Camp John Hay enjoy five perpetual 5 percent GIE.

Locators inside the Cagayan Ecozone and freeport, Zamboanga Ecozone and Freeprot, Aurora Ecozone and Freeport and Bataan Ecozone and Freeport enjoy a maximum of 8-year ITH and perpetual 5 percent GIE. –Manila Bulletin