The Fiscal Incentives Review Board (FIRB) has approved the grant of tax incentives for the builder of the Makati City Subway, the Department of Finance (DOF) announced.
In a statement released by the DOF on Monday, Nov. 8, it said that the FIRB took into consideration the projected increase in economic productivity in deciding to approve the tax perks for the Makati City Subway project.
According to the FIRB, the multi-billion peso infrastructure project would provide P24.4 billion in additional economic productivity per year once the system becomes operational by 2026.
Based on the FIRB approval, the P81-billion subway by the Philippine Infradev Holdings Inc. will get four-years of income tax holiday, which will be followed by five-years of enhanced deductions and duty exemption.
Finance Secretary Carlos G. Dominguez III said the enhanced deductions and duty exemption will cover importation for the construction, operation, management, and maintenance of the rail project.
Dominguez, however, clarified that the the incentives are confined only to rail operation and will not apply to the other business activities that would be generated from the subway operations, such as the lease of retail areas and advertising.
Revenues from other business activities should be subject to the regular corporate income tax rate and other applicable taxes, said Dominguez, who is also FIRB chair.
“A majority” of the FIRB board, consisting of the DOF, Department of Trade and Industry, National Economic and Development Authority, and the Office of the President, approved the subway project’s incentives, the DOF said.
“This will be monitored, along with the other projected benefits, in accordance with the principle of granting incentives based on merit or performance embodied in the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Law,” the DOF said.
Trade Secretary Ramon Lopez, who is also FIRB co-chair, said the projected productivity boost and other benefits from the Makati City Subway offset the economic costs that will be incurred by the government, such as foregone revenues.
Throughout the deliberations for the project, Dominguez also said that the Makati City government and the Department of Transportation should work out the details of how to connect the proposed subway to the Metro Manila Subway project of the national government.