SIXTEENTH CONGRESS OF THE 
REPUBLIC OF THE PHILIPPINES 
Second Regular Session 
) 
) 
) 
SENATE 
Senate Bill No. 2421 
Introduced by SENATOR LOREN LEGARDA 
AN ACT 
iUltlltr 
('Ih~ •• 1 tit-" ....... , 
TO STRENGTHEN THE SUSTAINABILITY AND COMPETITIVENESS 
OF THE PHILIPPINE MOTOR VEHICLE MANUFACTURING INDUSTRY 
With poverty incidence among Filipinos reaching 24.9% in the first semester of 
2013 and unemployment and underemployment rates hitting 7.0% and 18.2%, 
respectively as of April 2014, the quality of growth recorded recently by the 
economy leaves much to be desired. Policymakers have partly attributed this 
lack of inclusive growth to the declining share of industry sector in the overall 
economy which together with the agricultural sector is expected to generate jobs 
suitable for low-skilled workers. From a high of 42.1 % in 1981, the share of 
industry - including manufacturing settled at 32.1 % in 2012. In its March 2014 
report entitled Philippine Economic Update: Pursuing Inclusive Growth 
Through Sustainable Reconstruction and Job Creation, the World Bank 
recommends that government enact industrial policies to lend support to the 
sector. 
One sub-sector offering tremendous potential for the industry's rebound is the 
manufacture of motor vehicle parts. As noted by former National Economic and 
Development Authority Director-General Cielito Habito, it has "strong backward 
linkages with local industl"ies, indicating strong multiplier effects for the 
economy". Further citing a 2010 paper, he explained that every P100 worth of 
production in industry leads to a rise in total economic output by P367. Apart 
from its spillover effects to other industries, it provides for technology transfer to 
local firms thus increasing overall potential of the local economy. 
Though the Deparhnent of Trade and Industry has started crafting its motor 
vehicle industry roadmap, there is a need to enact a specific law to ensure 
consistency of policy. Apart from the crafting of a National Motor Vehicle 
Manufacturing Development Plan (NMVMDP), tl,is bill seeks to provide the 
following fiscal incentives: 
• 
Tax and duty-free importation of capital equipment 
• 
Deduction on training expenses 
• 
Double deduction on research and development 
• 
Option to deduct from taxable income the net operating loss incurred 
during first three years of operations for the seven consecutive taxable 
years 
It is worth emphasizing however that this measure will be for naught unless the 
government addresses rampant smuggling of second-hand vehicles through the 


freeport zones as cited in the 2013 study by the Philippine Institute for 
Development Studies. More than the tax leakages estimated to be worth P21 
billion, the potential offered by the industry in triggering the country's long-
delayed industrialization will be gone with it. 
In view of the foregoing, the immediate passage of this bill is sought. 
.~~= 
Senator 


SIXTEENTH CONGRESS OF THE 
REPUBLIC OF THE PHILIPPINES 
Second Regular Session 
) 
) 
) 
SENATE 
Senate Bill No. 2421 
Introduced by SENATOR LOREN LEGARDA 
AN ACT 
'1. SEP 22 f'S 50 
RECEIVEO 8v:-f-
TO STRENGTHEN THE SUSTAIN ABILITY AND COMPETITIVENESS 
OF THE PHILIPPINE MOTOR VEHICLE MANUFACTURING INDUSTRY 
Be it enacted by the Senate and House of Representatives of the Philippines in Congress 
assembled: 
1 
SECTION 1. Title. - This Act shall be known as, "The Philippine Motor Vehicle 
2 
Manufacturing Industry Competitiveness Act of 2014." 
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4 
SECTION 2. Declarntion of Policy. - The national economy shall be geared towards 
5 
sustainable inclusive economic growth by promoting industrialization through 
6 
competitive industries and by encouraging enterprise. In recognition of the significant 
7 
role in economic development and nation building of the Philippine Motor Vehicle 
8 
Manufacturing Industry, as well as its central function in the country's industrial and 
9 
manufacturing sectors, the following are the declared policies of the State: 
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a) The State shall develop a comprehensive policy that will fast-track the 
12 
sustainable development and competitiveness of the Philippine Motor Vehicle 
13 
Manufacturing Industry, thereby effectively contributing to industrial capital 
14 
formation and employment generation; 
15 
16 
b) The State shall ensure a balanced transition phase to free trade at a minimized 
17 
risk to the Philippine Motor Vehicle Manufacturing Industry by efficiently 
18 
developing its capacities for competitiveness and promoting greater participation 
19 
in a further globalized economy through increased export; 
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c) The State shall promote the maximum scale integration of vehicle manufacturing 
22 
and the assembly of its respective parts and components; 
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d) The State shall encourage the effective and sustainable implementation of 
25 
research and development activities, including, but not limited to, technology 
26 
transfer, testing facilities and activities, and the promotion of automotive skills 
27 
training and development as a means to enhance the competitiveness of the 
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Philippine Motor Vehicle Manufacturing Industry; and 
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e) The State shall integrate motor vehicle manufacturing into the overall transport 
31 
policies and programs of the national government to optimize the sustained 
32 
growth and competitiveness of the Philippine Motor Vehicle Manufacturing 
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1 
Industry and to ensure the development of sustainable transportation systems in 
2 
the country. 
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4 
SECTION 3. Definition of Terms. - For purposes of this Act, the following terms are 
5 
defined as follows: 
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7 
a) "Board of Investments (BOI)" refers to the attached agency of the Department of 
8 
Trade and Industry created under Republic Act No. 5186. 
9 
10 
b) "Department of Trade and Industry (DTI)" refers to the government agency 
11 
created pursuant to Executive Order No. 133, s.eries of 1987. 
12 
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c) "Investment Priorities Plan (IPP)" refers to the overall plan prepared by the BOI 
14 
in accordance with the provisions of Executive Order No. 226, otherwise known 
15 
as the Omnibus Investment Code of 1987, as amended. 
16 
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d) "Motor Vehicle Manufacturing Industry" encompasses enterprises that are 
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engaged in the manufacture of motor vehicles and its parts and accessories or 
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components. 
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e) "Manufacture of Motor Vehicles" refers to the activities classified under Section 
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0, Division 34, Group 341 of the United Nations (UN) International Standard 
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Industrial Classification of All Economic Activities (ISIC) Revision (Rev.) 3, 
24 
which includes the manufacture of passenger cars, commercial vehicles, buses, 
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trolley-buses and coaches, motor vehicle engines, chassis fitted with engines and 
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other motor vehicles. 
27 
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This also refers to the activities classified under Section 0, Division 35, Group 
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359, Class 3591 of UN ISIC Rev. 3, which includes the manufacture of 
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motorcycles (including mopeds) and cycles fitted with an auxiliary engine, 
31 
whether or not with attached side-car, and" delivery" or "sporting" motorcycles. 
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33 
f) "Manufacture of Parts and Accessories of Motor Vehicles" refers to the activities 
34 
classified under Section 0, Division 34, Group 343 of the UN ISIC Rev. 3, which 
35 
includes the manufacture of parts and accessories for motor vehicles, including 
36 
their bodies and engines: brakes, gear boxes, axles, road wheels, suspension 
37 
shock absorbers, radiators, silencers, exhaust pipes, clutches, steering wheels, 
38 
steering columns and steering boxes and other parts and accessories not 
39 
elsewhere classified. 
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This also refers to the manufacture of bodies (coachwork) for motor vehicles, 
engines for motorcycles, side-cars, and parts and accessories of motorcycles. 
44 
g) "Medium Term Philippine Development Plan (MTPDP)" refers to the master 
45 
plan for economic development implemented by the National Economic 
46 
Development Authority (NEDA), which identifies growth sectors for the next six 
47 
(6) years and defines the programs, policies, strategies and action plans to the 
48 
economic development goals of the government. 
49 
so 
h) "Philippine Export Development Plan (PEDP)" refers to the rolling three (3) year 
51 
export development plan prepared by the DTI, which defines the country's 
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annual and medium-term export thrusts, strategies, programs and projects 
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2 
3 
jointly implemented by the government, export sector and other concerned 
stakeholders. 
4 
SECTION 4. National Motor Vehicle Manufacturing Development Plan (NMVMDP). -
5 
The DTI, through the BOI, in consultation with the representatives from the private 
6 
sector, the academe and other pertinent stakeholders, shall prepare and implement a 
7 
rolling three (3) year National Motor Vehicle Manufacturing Development Plan, 
8 
hereinafter referred to as the "Plan". This Plan shall be validated and updated annually 
9 
by the BO!. 
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The Plan, which shall be integrated into the PEDP and the MTPDP, will define the 
12 
Philippine Motor Vehicle Manufacturing Industry's annual and medium-term 
13 
manufacturing and export targets, as well as its programs and strategies to support the 
14 
country's manufacturing and export thrusts. The Plan shall also identify priority 
15 
development products, which shall be characterized by high manufacturing value-
16 
added and with high potential for economic efficiency, as primary focus of incentives. 
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SECTION 5. Fiscal Incentives for Manufacturers of Motor Vehicles, Parts and Accessories. 
19 
- Enterprises engaged in the manufacture of motor vehicles, parts and accessories duly 
20 
registered with the BOI as participant under the National Motor Vehicle Manufacturing 
21 
Development Plan (NMVMDP), shall be entitled to the following incentives: 
22 
23 
a) Income tax-based - A manufacturer may choose any of the follOWing options as its 
24 
income tax-based incentive, subject to the condition that its choice shall be final 
25 
and cam10t be changed: 
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35 
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i. 
7% Gross Income Earned - A manufacturer may avail of the seven 
percent (7%) tax on GIE in lieu of all national and local taxes, except 
Value Added Tax (VAT) and Real Property Tax on land owned by 
private developers. 
OR 
ii. 15% Reduced Income Tax - A manufacturer may be entitled to a reduced 
income tax rate of fifteen percent (15%) instead of the regular income tax 
rate provided for in the National Income Revenue Code, as amended. 
38 
b) Net Operating Loss Carry-Over (NOLCO). - A net operating loss incurred during 
39 
the first three (3) years of operations shall be carried over as a deduction from 
40 
taxable income for the seven (7) consecutive taxable years immediately following 
41 
the year of such loss. Provided, however, That the net operating loss shall be 
42 
computed in accordance with the provisions of the National Internal Revenue 
43 
Code and its Implementing Revenue Regulations, any provision of this Act to the 
44 
contrary notwithstanding, except that income not taxable either in whole or in 
45 
part under thus or other laws shall be included in gross income. 
46 
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c) Accelerated Depreciation. - At the option of the taxpayer and in accordance with 
48 
the procedure established by the Bureau of Internal Revenue (BIR), fixed assets 
49 
may be (1) depreciated to the extent of not more than twice as fast as normal rate 
50 
of depreciation or depreciated at normal rate of depreciation if expected life is 
51 
ten (10) years or less; or (2) depreciated over any number of years between five 
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(5) years and expected life if the latter is more than ten (10) years; and the 
53 
depreciation thereon allowed as a deduction from taxable income Provided, That 
3 


1 
2 
3 
the taxpayer notifies the BIR at the beginning of the depreciation period which 
depreciation rate allowed by thus section will be used by it. 
4 
d) Deduction on Training Expenses. - In addition to the allowable ordinary and 
5 
necessary expenses on training which are fully deductible under the provisions 
6 
of the National Internal Revenue Code, expenses incurred in training schemes 
7 
approved by the appropriate agency shall be eligible for deduction during the 
8 
financial year the expenses were incurred: 
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i. 
Expenses incurred in providing employees training shall be eligible for 
single deduction; and 
ii. 
Expenses incurred in providing training to Small and Medium 
Enterprise (SME) parts manufacturers shall be eligible for double 
deduction; 
16 
e) Double Deduction on Research and Development. - Expenses incurred for research 
17 
and development activities shall be eligible for double deduction from taxable 
18 
income. 
19 
20 
f) 
Tax and Duty Free Importation of Capital Equipment. -
The importation of 
21 
machinery, equipment and its accompanying spare parts imported in the name 
22 
of the manufacturer as consignee shall be exempt to the extent of one hundred 
23 
percent (100%) of the duties and taxes payable thereon, Provided, That the 
24 
importation complies with the following conditions: 
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i. 
These are not manufactured domestically in sufficient quantity, of 
comparable quality and at reasonable prices; 
ii. 
These are reasonably needed and will be used exclusively in the 
manufacture of motor vehicles; and 
iii. 
Prior approval of the BOI was obtained for the importation of such 
machinery, equipment and its accompanying spare parts. 
33 
Provided furtlIer, That such machinery, equipment and accompanying spare parts 
34 
shall not be sold, transferred or disposed without the prior approval of the BOI 
35 
within five (5) years from date of acquisition, in which case the manufacturer as 
36 
consignee and the vendee, transferee, or assignee shall be solely liable to pay 
37 
twice the amount of the duty and tax exemption given it. 
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g) Tax and Duty Free Importation of Training Equipment. - The importation of 
40 
equipment, tools and implements for in-house training projects and imported in 
41 
the name of the manufacturer as consignee shall be exempt to the extent of one 
42 
hundred percent (100%) of the duties and taxes payable thereon, Provided, That 
43 
the importation complies with the following conditions: 
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50 
51 
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53 
i. 
These are not manufactured domestically in sufficient quantity, of 
comparable quality and at reasonable prices; 
ii. 
These are reasonably needed and will be used exclusively for training 
projects; and 
iii. 
Prior approval of the BOI was obtained for the importation of such 
equipment, tools and implements. 
Provided further, That such equipment, tools and implements shall not be sold, 
transferred or disposed without the prior approval of the BOI within five (5) 
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1 
years from date of acquisition, in which case the manufacturer as consignee and 
2 
the vendee, transferee, or assignee shall be solely liable to pay twice the amount 
3 
of the duty and tax exemption given it. 
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h) Qualified enterprises availing of incentives provided under this Act and its 
6 
Implementing Rules and Regulations shall be eligible to incentives and privileges 
7 
provided for by other special laws: 
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i. 
Executive Order No. 226, otherwise known as the Omnibus Investment 
Code of 1987, Provided, That the manufacture of motor vehicles shall 
regularly form part of the IPP as a preferred area for investments, 
unless otherwise declared by law; 
ii. 
Republic Act No. 7844, otherwise known as the Export Development 
Act of 1994; 
iii. 
Republic Act No. 7916, otherwise known as the Special Economic Zone 
Act of 1995, as amended; and 
iv. 
Issuances related to the implementation of the NMVMDP. 
Provided, That the enterprise shall register under the aforementioned laws and 
that there is no double availment of the same incentives. 
22 
SECTION 6. Period of Availment of IncentiIJes. - The total period of availment of all 
23 
tax incentives enjoyed by a manufacturer provided herein shall in no case exceed 
24 
twenty (20) years. 
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26 
SECTION 7. Congressional Oversight Committee on the Competitiveness of the Motor 
27 
Vehicle Manufacturing Industn;. - To ensure the effective implementation of this Act;a 
28 
Congressional OverSight Committee on the Competitiveness of the Motor Vehicle 
29 
Manufacturing Industry is hereby created to be composed of the Chairs of the 
30 
Committee on Trade of both Houses, six (6) members of the House of Representatives 
31 
and six (6) members of the Senate, to be designated respectively by the Speaker of the 
32 
House and by the President of the Senate, who shall endeavour to have the various 
33 
stakeholders of the Philippine Motor Vehicle Manufacturing Industry represented. 
34 
35 
The Chairs of the Committees on Trade in the Senate and House of 
36 
Representatives shall be, respectively, the Chair and Co-Chair of the Oversight 
37 
Committee. The other members shall receive no compensation; however, traveling and 
38 
other necessary expenses shall be allowed. The Committee shall oversee and monitor 
39 
the implementation of the National Motor Vehicle Manufacturing Development Plan, as 
40 
well as all programs, projects and activities related to the competitiveness of the 
41 
Philippine Motor Vehicle Manufacturing Industry, and its aligned concerns in both 
42 
public and private sectors, with a view to providing all legislative support and 
43 
assistance within the powers of Congress to ensure their inclusion, wherever feasible, in 
44 
the national, regional, provincial, municipal, and sectoral development plans, and to see 
45 
them through their successful implementation. 
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SECTION 8. Powers and Functions of the Committee. - The Congressional Oversight 
48 
Committee on the Competitiveness of the Motor Vehicle Manufacturing Industry shall 
49 
have the following powers and functions: 
50 
51 
a) Prescribe and adopt guidelines that will govern its work; 
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53 
b) Hold hearings, receive testimonies and reports pertinent to its speCified concerns; 
5 


1 
2 
c) Secure from any department, bureau, office or instrumentality of the 
3 
Government such assistance as may be needed, including technical information, 
4 
preparation and production of reports and submission of recommendations or 
·5 
plans as it may require; 
6 
7 
d) Summon by subpoena any public or private citizen to testify before it, or require 
8 
by subpoena duces tecum to produce before it such records, reports or other 
9 
documents as may be necessary in the performance of its functions; 
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e) Use resource persons from the public and private sectors as may be needed; 
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f) Approve the budget for the work of the Committee and all disbursements 
14 
therefrom, including compensation of all personnel; 
15 
g) Organize its staff and hire and appoint such employees and personnel whether 
16 
temporary, contractual or on consultancy, subject to applicable rules; and 
17 
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h) Generally, to exercise all the powers necessary to attain the purposes for which it 
19 
is created. 
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SECTION 9. Periodic Reports. - The Committee shall submit periodic reports on its 
22 
findings and make recommendations on actions to be taken by Congress and the 
23 
appropriate departments, and that in order to carry out the objectives of this Act, an 
24 
initial amount of Twenty Million Pesos (P20,000,000.00) is hereby appropriated for the 
25 
Oversight Committee for the first year of its operation. 
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SECTION 10. Automatic Review. - Every five (3) years after the effectivity of this Act, 
28 
the oversight committee shall review the policies and programs in the National Motor 
29 
Vehicle Manufacturing Development Plan and shall make recommendations, based on 
30 
its findings, to the President and to both Houses of Congress. 
31 
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SECTION 11. Rationalization Measures. - In general, the Government shall formulate 
33 
and implement rationalization measures in specific areas in need of adjustment, or 
34 
where existing policies are challenged, rendered inefficient or obsolete by varying 
35 
business climate with the end view of promoting economies of scale, efficiency, 
36 
productivity and competitiveness. 
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SECTION 12. Harmonization with Non-Fiscal Support Measures. - The Government 
39 
shall formulate and implement industry-wide non-fiscal support measures that will 
40 
harmonize the goals of the Philippine Motor Vehicle Manufacturing Industry towards 
41 
effective and consistent regulation, transparency in its rules, and sustaining efficiency, 
42 
productivity, cost-reduction and competitiveness. These aforementioned measures 
43 
should address the strengthening of supporting and complementing industries such as, 
44 
but not limited to, steel, plastic and electrical in order to establish a strong and 
45 
sustained foundation for the aforementioned industry. 
46 
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SECTION 13. Implementing Rules and Regulations (IRR). - The Secretary of the D'U, 
48 
within ninety (90) working days after the effectivity of this Act, in consultation with the 
49 
Department of Finance (DO F), the National Economic and Development Authority 
50 
(NEDA) and other agencies concerned, the private sector and other concerned 
51 
stakeholders, and in coordination with the Congressional Oversight Committee on the 
52 
Competitiveness of the Motor Vehicle Manufacturing Industry, shall promulgate the 
53 
rules and regulations for the effective implementation of this Act. The Secretary of the 
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DTI shall submit to the Committee on Trade of both Houses of Congress copies of the 
2 
IRR within thirty (30) days after their promulgation. 
3 
4 
Any violation of this section shall render the officialj s concerned liable under 
5 
Republic Act No. 6713 otherwise known as the "Code of Conduct and Ethical Standards 
5 
for Public Officials and Employees" and other existing administrative and/ or criminal 
7 
laws. 
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SECTION 14. Repealing Clause. - All laws, decrees, executive issuance, rules and 
10 
regulations inconsistent with this Act are hereby repealed or modified accordingly. 
11 
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SECTION 15. Separability Clause. - The provisions of this Act are hereby declared to 
13 
be separable, and in the event one or more of such provisions are held unconstitutional, 
14 
the validity of the other provisions shaH not be affected thereby. 
15 
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SECTION 16. Effectivity. - This Act shall take effect thirty (30) days from the date of 
17 
its publication in the Official Gazette or in at least two (2) newspapers of general 
18 
circulation. 
Approved, 
7