The Bureau of Internal Revenue (BIR) has finally released the rules for the grant of fiscal incentives to investors in the Tourism Enterprize Zones (TEZ). The BIR Revenue Regulations No. 7-2016 was signed on November 15 and published on the Manila Bulletin on November 21. It shall take effect on December 6, 15 days after the publication.
By virtue of RA 9593 of the Tourism Act of 2009, TIEZA is given the sole and exclusive jurisdiction in the establishment of a TEZ. All permits and licenses shall be issued by TIEZA to TEZ Operators and Registered Tourism Enterprises.
TIEZA made a shift towards the full implementation of the said mandate. It has already designated five flagship TEZs and six ordinary TEZs while the revenue regulation from BIR was still pending. With incentives already out for investors, TIEZA expects more applications from corporations, local government units and other interested parties.
TIEZA shall grant the following fiscal incentives to TEZs:
- a six-year income tax holiday (ITH) that may be extended for another six years;
- as an ITH alternative, a 5% preferential tax on gross income in lieu of national taxes except for real property tax and fees of the Tourism Infrastructure and Enterprise Zone Authority (TIEZA);
- in lieu of ITH or the 5% preferential gross income tax, a net operating loss carry over (NOLCO) scheme;
- import tax exemptions for capital goods and equipment needed for TIEZA-registered activities;
- import tax exemptions for transport equipment and spare parts needed for TIEZA-registered activities;
- exemption from value-added tax (VAT) and excise tax goods imported for TIEZA-registered activities;
- tax credit equivalent to national taxes paid on local goods and services procured by RTEs for activity in TEZs, provided that input VAT will be allowed as credit against only output VAT;
- and tax deduction of up to 50% of cost of environmental protection and cultural heritage preservation activities, as well as of sustainable livelihood programs of the registered tourism enterprises (RTEs).
TIEZA may also decide to grant incentives to tourism businesses outside of TEZs.
As stipulated in the TEZ Guidelines, to avail of the incentives, the TEZ operator or the Registered Tourism Enterprise shall observe and abide by the provisions of RA 9593 and its Implementing Rules and Regulations; comply with directives that TIEZA may issue from time to time; and allow TIEZA representatives to examine its book and other pertinent records.
Incentives will be withheld from TEZ operators delinquent in compliance with the terms and conditions of designation or registration. TIEZA may also cancel or suspend granted incentive for violation of RA 9593, material representation or false statements made to TIEZA before designation/registration and whenever the project ceases to be viable.
The newly released rules also provide that TIEZA-accredited locators that have been found to have violated the terms of their registration will have to pay back taxes computed up to three years directly preceding the date of promulgation of the ruling on their violation.
TIEZA also grants non-fiscal incentives not covered by the revenue regulation. These are:
- Employment of foreign nationals
- Importation of Professional Instruments and Household effects
- Special investor’s Resident Visa
- Foreign Currency Transactions
- Requisition of Investment
- Lease and Ownership of Land
The government recognizes the advantage of TEZs in tourism development. It sees the TEZ’s role and capacity to generate jobs and economic activities especially in the provinces.
Granting of fiscal incentives to TEZ operators will open better competition among industry players. This will allow businesses to offer lower rates, thus pulling the market towards the Philippine tourism industry.
TEZs availing of the fiscal incentives under RA 9593 are not qualified to avail of similar incentives under other laws.
TIEZA issues the Certificate of Entitlement (CoE) to the designated/registered TEZ on a yearly basis.
To view Revenue Regulation 7-2016, please click the link below: