Shenzhen Grandsun Electronics Co. Ltd., a Chinese sub contractor of a European company, is planning to expand operation in the country in one of the economic zones in Batangas City.
This was revealed by Trade and Industry Secretary Ceferino S. Rodolfo at the recent virtual meeting with members and officers of the Chinese Enterprises Philippines Association (CEPA) on the latest business environment policies in the country including the recently-enacted Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act.
According to Rodolfo, who is also managing head of the Board of Investments, under the newly passed CREATE Law the Chinese firm Shenzhen can get four years of income tax holiday (ITH) and even up to six to seven years because of the level of technology/location. The ITH regime will be followed by 10 years of either Enhanced Deduction (ED) or special Corporate Income Tax (CIT) of five percent on gross income earned. In addition, Shenzhen’s component suppliers that will establish operations in the country are also entitled to the same incentives. It will be the choice of companies to go for either ED or the special CIT.
Rodolfo did not provide other details of the Shenzhen project but he added that BOI now allows the use of second-hand equipment as long it is modern and up to date in terms of technology. “It can be registered for qualified projects. This is specially targeted for companies that are exploring relocation of production facilities, to secure a more efficient, more resilient, and more stable supply chain,” he said.
In the same event, Rodolfo also assured Chinese investors The Philippines has remained an ideal investment destination as investors and businesses continue to look at the country to grow their businesses, even with the pandemic.
“Our country remains competitive not only in terms of attracting foreign investments but also in cementing its business-friendly positions,” Rodolfo said, as he emphasized that the government is strongly optimistic of a post-pandemic recovery as the fundamental structure and strength of our economy remains intact. “Our economy positively responds to the easing of restrictions,” he said.
He cited the latest employment data from October 2020 to January 2021 which showed that around 1.4 million jobs were already restored following the lockdowns. Also, the Production Manufacturers’ Index (PMI) remained steady at over 50 percent as of March since the start of the year even as inflation slowed down in March to 4.5 percent as the country stabilizes and expects an inflationary downtrend in the coming months.
“We even reached the second-highest level of approved investments in 2020 (in the Agency’s history) despite the pandemic with over Php1 trillion. For 2021, we hit P138 billion as of March, a 66 percent improvement from P83 billion in the same period last year,” he said. “This year, we got off to a strong start as Central Bank figures show a 41.5 percent jump in foreign direct investments (FDI) inflows with $961 million in January compared to just $679 million in the same month in 2020,” Rodolfo said.
Rodolfo said that the CREATE Act can help Chinese investors as it “provides the government with the flexibility to grant fiscal and non-fiscal incentives for high-value strategic investments including the longer period for enjoying income tax holiday (ITH) and tax subsidies for key cost items.”
He noted that companies that are engaged in research and development, high-tech manufacturing, and the generation of new knowledge could even avail of longer incentives under CREATE as “the new law addresses the impact of the trade war between the US and China. This is attractive for companies that are looking to diversify their location or for complementary business locations as the CIT will be reduced from 30 to 25 percent for large firms. This will open up cash flows to support the efforts of businesses to rebuild during this pandemic and allows the country’s recovery and boost our long-term growth.”
Rodolfo urged CEPA member enterprises, especially in innovation-driven fields of infrastructure, equipment manufacturing/construction, and information and technology (IT), to expand and diversify their businesses in the country. “Through continued strong partnership and collaboration with Chinese representatives in the Philippines such as the Chinese Embassy, the Bank of China, and CEPA, we are not far from realizing our goal of being among the region’s top investment destinations,” Undersecretary Rodolfo concluded.
Members of CEPA, which was established in the Philippines 20 years ago, with around 90 members, composed mostly of state-owned companies that are into agriculture, manufacturing, construction, and technology and have a partnership with Globe and PLDT such as Huawei, FiberHome, ZTE, Dito Telecommunity Corporation, was also briefed on CREATE’s key features and the approach for the drafting of the Strategic Investment Priority Plan, a list of preferred investment activities that may qualify for investment incentives under the new law.