By BERNIE CAHILES-MAGKILAT
The proposed 2020 Investment Priorities Plan (IPP), now pending for approval by President Rodrigo Duterte, has included two new broad categories – COVID-19 response and Balik Probinsya – that would be eligible for juicy government tax incentives.
Ceferino S. Rodolfo
Trade and Industry Undersecretary Ceferino S. Rodolfo said the Board of Investments (BOI), which heads the inter-agency committee in drafting the IPP, submitted the proposed 2020 IPP early this year to Malacañang but it was overtaken by the COVID-19 events. IPP is a list of preferred economic activities that are entitled to a juicy set of government incentives, including income tax holiday (ITH).
The delay, however, provided BOI the opportunity to withdraw the submission for amendments to include the two new major categories in the list. The amended 2020 IPP was resubmitted to Malacañang last week only. Except for the two new major categories, Rodolfo said, the 2020 IPP was just a carry-over of the 2019 IPP.
COVID-19 mitigating response category refers to projects or investments in activities that would help fight the virus. This may include companies that are producing for the domestic market products like ventilators, face masks, face shields and personal protective equipment and other medical devices and inputs for these medical supplies.
On the Balik Probinsya category, this includes projects that will support and encourage Filipinos to go back to the regions or to their hometown.
Rodolfo said the BOI will have the power to declare provinces as less developed area (LDA) so projects locating there that fall under the Balik Probinsya program will be eligible for government tax incentives. Rodolfo said they sought this power to declare a province an LDA because based on experience even during the “Typhoon Yolanda,” it is very difficult to declare an LDA due to very stringent guidelines.
“Hopefully, we can grant pioneer incentives so they can enjoy longer ITH incentives,” said Rodolfo. A company that will locate in an area classified as LDA is entitled to longer ITH. Under the existing guidelines, a project classified as pioneer would be entitled to 8 years of ITH.
Putting the COVID-19 response and Balik Probinsya categories in the IPP provides enough time for companies to assess their project location. At present, the Bayanihan to Heal As One Act provides incentives for COVID-19 mitigating ventures but the law is good for three months only and will expire on June 24 this year.
Rodolfo further explained that the 2020 IPP serves as a transition to the anticipated passage of the CITIRA (Corporate Income Tax Incentives Reform Act) bill, now renamed as Corporate Recovery and Tax Incentives for Enterprises Act or CREATE bill. Under the CITIRA Bill, the IPP will be replaced with the Strategic Investment Priority Plan (SIPP) but Rodolfo said it is not yet certain if the SIPP will remain in the CREATE Bill.
Companies or investors that will be registered under the 2020 IPP will still enjoy the incentives provided under Executive Order 226 or the Omnibus Investments Code.
Aside from ITH, IPP-listed enterprises are eligible for tax credit on raw materials, supplies, and semi-manufactured products, additional deduction from taxable income for labor expense (cannot be simultaneously enjoyed with the ITH incentive), duty-free importation of capital equipment, spare parts and accessories, and additional deduction from taxable income for necessary and major infrastructure works (cannot be simultaneously enjoyed with the ITH incentive).
These projects are also entitled to non-fiscal incentives such as employment of foreign nationals; guaranteed repatriation of foreign investments and earnings thereon; and importation of consigned equipment for an unlimited period subject to posting of a re export bond.