[ Manila Bulletin Online ] July 7, 2008
By BERNIE CAHILES–MAGKILAT
The Board of Investments (BoI) has allowed cross registrations of companies with other investment generating agencies but denied allegations it is guilty of allowing double availment of incentives for its registered firms or firms that have also availed of the same incentives offered by other investment generating agencies.
Trade and Industry Undersecretary and BoI managing head Elmer C. Hernandez explained this after the Department of Finance has revived an old issue on double incentives availment.
While there have been few instances where projects have cross registrations, as far as the BoI is concerned, the BoI and PEZA-registered firms have not availed of the same incentives twice. The DTI Secretary is chair of both the BoI and PEZA.
Instances where the BoI and PEZA enterprises have cross registrations occur under the bilateral tax treaty that BoI has with other countries.
The bilateral tax agreement allows companies a preferential 10 percent withholding tax provided they are registered with the BoI on a pioneer status.
Since these bilateral tax treaties with some countries had been signed even before the creation of then Export Processing Zone Authority and now Philippine Economic Zone Authority (PEZA), companies registered with PEZA who want to avail of the preferential tax rate are allowed to register with the BoI for purposes of the availment of preferential tax.
While the BoI has bilateral tax agreements with various countries, Hernandez most companies that have availed of the preferential tax have been Japanese-owned.
There are also other instances where a company would cancel a registration from the BoI and transfer to PEZA or vice versa.
But if a company has to cancel its PEZA registration and transfer to the BoI, it is only entitled to the remaining life of its incentives, Hernandez said.
It must also seek clearance from either PEZA or BoI if it has to can cancel registration in one and transfer to the other, Hernandez added.
Hernandez, however, said the transfer of registration is a rare occurrence and in the history of BoI there have been very few companies that have done that.
Instances that would pave the way for the transfer of registration of companies are as follows: the factory or area has been declared as PEZA zone making it under PEZA rules; relocation of facilities inside PEZA zone and; if it would export 70 percent or if it decides to cater to the domestic market.
PEZA also offers a better incentive package than BoI. Just like the BoI, PEZA grants income tax holiday incentives. It also grants duty-free importation of capital equipment and 5 percent tax on gross income in lieu of all national and local taxes.
Under the PEZA rules, however, its registered enterprises must export at least 70 percent of its total production.
The BoI allows the registration of domestic-oriented enterprises but it grants only preferential import duty on capital equipment although it allows a duty drawback.
In this situation, the company has to choose where it would register.
Hernandez cited the case of the Philippine Phosphate Fertilizer Corp. (Philphos), which had done registration transfers in the past.
There were times when Philphos chose to stay with PEZA because it exported 70 percent of its production but there were times also when it chose to register with BoI because it preferred to cater to the domestic market.
In all of these transfers of registration, however, Philphos was only entitled to the remaining life of its incentive package.
This means that if a company has already availed two years of the four-year income tax holiday it was granted to by BoI, then it has only two remaining years of ITH availment should it transfer registration with the PEZA.
In the case of projects registered with the Subic Bay Metropolitan Authority and Clark Special Economic Zone, Hernandez said they are not entitled to ITH although they have the same privileges with PEZA being exporters.
To level the playing field, Hernandez said the BoI and the SBMA and Clark have signed a memorandum of agreement allowing SBMA and Clarkregistered enterprises to register with the BoI for purposes of ITH incentive availment only.
But Hernandez said these firms must be endorsed first by SBMA and Clark to be able to avail of ITH from the BoI.
"But in all these there is no double availment of incentives," Hernandez pointed out.
"We are just trying to level the playing field for our exporters. Why should a Clark or SBMA firms have lesser privileges than those with PEZA when they are both exporters?" Hernandez said.
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