DOF, BOI agree on tax incentives
The Board of Investments and the Department of Finance have agreed to grant a longer reduced corporate income tax (CIT) at 15 percent for 15 years instead of 10 years to further sweeten the government’s tax incentives to investors.
Trade and Industry Secretary Gregory L. Domingo, who is also chairman of the BOI, told reporters that both agencies are expected to submit their joint position for the Fiscal Incentives Rationalization bill within this first quarter.
The lower CIT rate of 15 percent is only half of the current 32 percent regular CIT.
“We hope to submit our joint position before the opening of Congress,” Domingo said. Congress is set to open on January 19. The Senate committee on ways and means is chaired by Sen. Sonny Angara while the House is chaired by Marikina Rep. Romero Federico S. Quimbo.
This new CIT incentive package, however, is only for BOI-registered enterprises. The Philippine Economic Zone Authority, which registers export-oriented enterprises, is not in favor of any change in its incentives package, which includes the grant of ITH, 5 percent tax on gross revenue after the ITH availment, and duty-free importation of capital equipment.
The longer CIT coverage of 15 years was approved by DOF in consideration of further attracting foreign investments into the country.
According to Domingo, both parties have noted that a 10-year ICT would be a little bit short and not attractive enough for investors. Thus, they both moved for a longer 15-year coverage.
The DOF, which has been tightly watching any drain in government resources, also has agreed to the longer CIT in lieu of income tax holiday, because this assures the government of revenues as soon as the company starts operation.
The lower and longer CIT perk is also more acceptable to companies than the current ITH scheme. In the case of ITH, while a company is already assured of no ITH in the first few years of operation it does not really benefit from this incentive because companies do not normally earn on the first few years of their operations.
Domingo also vowed to cooperate with Congress to ensure passage of the bill.
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