ROUSE OF REPRESENTATIVES:

Republic of the Philippines RECEIVED
HOUSE OF REPRE; PATIV
Quezon City Dare: __30 JUN 2016

Fes

NTEENTH CONGRE
First Regular Session

7 23 PRSTRATION UNIT.
HOUSE BILLNO._ &¥4 LS AND INDEX SERVICE

Introduced by Representative Eric D. Singson

EXPLANATORY NOTE

‘The Philippines, ranked 103" of 189 economies in the 2016 World Bank's Doing
Business report, needs to further enhance the country’s competitiveness. While the
report does not measure macroeconomic stability and other fundamentals, the report
underscores the need to streamline government’s interface with business,
complemented by other reforms which encourage investment

These reforms must include optimizing the grant of incentives to industries critical to
development. Redundant incentives must be minimized, if not totally removed, to give
way for more productive ones,

This measure aims to provide the policy framework to rationalize the grant of
incentives. It seeks to entice increased investments even as it minimizes the revenue
foregone from the grant of incentives, estimated to reach more than Php100 Billion
annually,

The measure hopes to pursue a market-responsive investment regime and grant
investment incentives that encourage long-term and recurrent investment promoting
substantial social and economic spillovers and equitable development across income
classes and across provinces.

‘The passage of this bill is earnestly sought.

7RIC D. SINGSON
2nd District, Hocos Sur


Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

ENTEENTH CONGRESS
First Regular

Introduced by Representative Eric D. Singson

AN ACT RATIONALIZING THE GRANT AND ADMINISTRATION OF
FISCAL INCENTIVES AND FOR OTHER PURPOSES

Be it enacted by the House of Representatives of the Philippines in Congress
assembled:

Title. This Act shall be known as the “Rationalization of Fiscal
Incentives Act.”

SEC. 2. Declaration of Policy. The national economy shall be developed to enhance
its global competitiveness through the rational grant and administration of incentives
to investments and qualified industrial development activities geared towards
employment generation and countrywide development. The following are the declared
policies of the State:

a. The State shall pursue a market-responsive investment regime;

b. The State shall grant investment incentives encouraging long-term and recurrent
investment which are simple to administer, time-bound and whose performance

and outcomes are easily verifiable;

¢. The State shall ensure that the grant of incentives promotes substantial social
and economic spillovers and equitable development across income classes and
across provinees and that these are fiscally sustainable, financially and
economically justifiable and is consistent with international treaties

d. The State shall ensure that investments granted tax incentives shall be conducted
in a manner that respects the laws of the land, including the protection of the
environment and natural resources, labor and good corporate governance
principles.

SEC. 3. Definition of Terms. — As used herein,


a. “Invesiment Promotion Agencies (II’As)” shall include the Board. of
Investments (BOI), Philippine Economic Zone Authority (PEZA), Bases
Conversion Development Authority (BCDA), Subic Bay Metropolitan
Authority (SBMA), Clark Development Corporation (CDC), Poro Point
Management Corporation (PPMC), the John Hay Management Corporation
(IHMC), Bataan Technology Park, Inc. (BTPI), Zamboanga City Special
Economic Zone Authority (ZCSEZA), Phividee Industrial Authority (PIA),
Authority of the Freeport Area of Bataan (AFAB), Cagayan Economic Zone
Authority (CEZA), the Aurora Pacific Economic Zone and Freeport Authority
(APECO), the Tourism Infrastructure and Enterprise Zone Authority (TIEZA),
and all other IPAs that may be created by law

b. “Capital Equipment” refers to machinery, equipment, major components
thereof, spare parts, accessories, tools, devices, apparatus, fixtures, fittings and
accompaniments which form part of the direct cost and are directly and
reasonably needed in the registered activity of the registered enterprise and
those required for pollution abatement and control, cleaner production and
water reduction/conservation of said enterprises.

“Export Enterprise” shall mean a registered enterprise which is a manufacturer,
processor or service provider and whose export sale of its products or services
is at least seventy percent (70%) of its total annual production of the preceding
taxable year. Provided, however, it shall not include any of the following
enterprises such as, but not limited to, those engaged in customs brokerage,
tucking/forwarding services, parcel services, janitorial services, security
services, insurance or banking and other financial services, consumers
cooperatives, credit unions, consultancy services, retail business, restaurants or
such other services, within the Freeport or Special Economic Zone, as may be
determined by the Board of the concerned Authority, duly accredited or
licensed by any of the Authorities and whose income derived within the
economic zones shall be subject to taxes under the National Internal Revenue
Code of 1997, as amended.

Provided, that an existing enterprise that meets the export requirement
provided herein may be registered as an export enterprise under this Act,
provided that it has not been in operation for more than ten (10) years.

d. “Export Sales of Goods” shall mean the sales revenues of an export enterprise
paid for in freely convertible foreign currency, determined from invoices, bills
of lading, inward letters of credit, landing certificates, or other commercial
documents, of the following:

(1) the sale and actual shipment of goods from the Philippines to a foreign
country by an export enterprise;

(2)sales by an export enterprise to another export enterprise of capital


equipment, raw materials, production supplies, packaging materials, and
other production requirements forming part of the direct cost of the
registered activity of the export enterprise registered under this Act;

(3) sales to diplomatic missions and to agencies or institutions allowed to
import said goods tax and duty-free;

(4) sales of an export enterprise to international sea or ait transport operations
of goods, equipment, spare parts and supplies, except fuel, forming part of
direct costs and to be used in the aircraft or sea craft and capital equipment
needed for the shipping or air transport operations;

(5) sales to a nonresident buyer for delivery to a resident local export enterprise
of Capital equipment, raw materials, production supplies, packaging
materials and other production requirements forming part of the direct cost
and are needed for the registered activity of the said export enterprise.

¢. “Export Sales of Services” shall mean the sales revenues or gross receipts of an
export enterprise, determined from contracts, invoices, vouchers, official
receipts, or other commercial documents paid for in freely convertible foreign
currency, of the following:

(1) services rendered to non-resident foreign clients by export enterprises:

(2) services rendered by an export enterprise to another export enterprise as
subcontractors or contractors in the manufacture or processing of goods;
other services forming part of the direct cost of the registered activity of an
export enterprise;

(3) services rendered to diplomatic missions and to other agencies or
institutions with tax and duty-free privileges;

(A) services for the overhaul, repair, and maintenance for international shipping
or air tansport operations, and foreign military aircraft or sea crafi rendered
by an export enterprise even if rendered locally

“Freeport” is an isolated and policed area adjacent to a port of entry as defined
by Section 3519 of the Tariff and Customs Code, which shall be operated and
managed as a separate customs territory to ensure free flow or movement of
goods, except those expressly prohibited by law, within, into and exported out
in the freeport zone where imported goods may be unloaded for immediate
transshipment or stored, repacked, sorted, mixed, or otherwise manipulated
without being subject to import duties. However, movement of these imported
goods from the free-trade area to a non-free trade area in the country shall be
subject to import duties and taxes.


& “Gross Income Harned (GIE)” refers to gross sales or gross receipts derived
from the registered activity less sales returns, discounts and allowances, and
cost of goods sold or cost of services rendered, as defined under Section 27(E)
(4) of the NIRC of 1997, as amended, and does not include indirect cost, such
as but not limited to administrative, management, financial and other
miscellaneous cost

h. “Registered Enterprise” shall mean any individual, partnership, corporation,
Philippine branch of a foreign corporation or other entity incorporated and/or
organized and existing under Philippine laws and registered with an IPA, in
accordance with this Act: Provided, however, That the term "Registered
Enterprise” shall not include any of the following service enterprises such as,
but not limited to, those engaged in customs brokerage, trucking or forwarding
services, janitorial services, security services, insurance or banking and other
financial services, consumers cooperatives, credit unions, consultancy
services, retail business, restaurants or such other similar services, as may be
determined by the IPA Board, irrespective of location, whether inside or
outside the zones, duly accredited or licensed by any of the IPAs and whose
income delivered within the economic zones shall be subject to taxes under the
National Internal Revenue Code of 1997, as amended

i. “Special Economic Zone" or “Ecozone" shall refer to a selected area with
highly developed or which has the potential to be developed into agro-
industrial, industrial, information technology, tourist/recreational, whose
metes and bounds are fixed or delimited by Presidential Proclamations. An
ecozone may contain any or all of the following: industrial estates (IEs),
export processing zones (EPZs), ICT parks and centers, free trade zones and
tourism estates.

J. “Strategic Investments” shall refer to the list of industries, services and other
economic activities eligible for incentives under this Act, prepared and
determined as priority or preferred activities in accordance with Chapter IV of
this Act.

SEC. 4. Scope and Coverage. This Act shall cover all existing [PAs and other IPAs
that may be created by law. The existing IPAs are the Board of Investments (BOL),
Philippine Economic Zone Authority (PEZA), the Bases Conversion Development
Authority (BCDA), the Subic Bay Metropolitan Authority (SBMA), the Clark
Development Corporation (CDC), the John Hay Management Corporation (JHMC),
the Poro Point Management Corporation (PPMC), the Bataan Technology Park Inc
(BTPH), the Cagayan Economic Zone Authority (CEZA), the Zamboanga City Special
Economic Zone Authority (ZCSEZA), the PHIVIDEC Industrial Authority (PIA), the
Aurora Pacific Economic Zone and Freeport Authority (APECO), the Tourism
Infrastructure and Enterprise Zone Authority (TIEZA), and the Authority of the
Freeport Area of Bataan (AFAB).



All existing and future [PAs vested with the power to confé
incentives shall offer only the incentives provided for in this Act.

and administer

IPAs shall maintain their functions as provided for in their
except to the extent modified by the provisions of this Act.

spective Charters

SEC. 5. Strategic Investments Plan (Plan). ~ The BOI Board, in coordination with
the Office of the President, the concerned IPAs, and other appropriate government
agencies and the private sector, shall formulate the Plan to be submitted to the
President for his approval not later than December of the third year set for periodic
review, The Plan shall be valid for a period of three (3) years.

In the listing of the activity in the Plan, the following shall be complied with

(a) The activity shall be covered by the Philippine Development Plan (PDP) or
its equivalent and other government programs;

(b) The activity shall satisfy the following conditions
(1) Substantial amount of investments;
(2) Considerable generation of employment:
(3) Use of modern or new technology; or
(4) Installation of adequate environmental protection systems:
The threshold amount of investments and employment generation required

for a specific activity shall be subject to a periodic review every three (3)
years taking into consideration international standards and other indicators.

(c) The activity must comply with the specific qualification requirements or
conditions for a particular sector or industry and other limitations as set and
determined by the BOI Board.

Subject to publication requirements and the criteria for investment priority
determination, the BOI may, at any time, include additional areas in the Plan, alter any
of the terms of the declaration ef an investment area, and temporarily or permanently
suspend activities on the Plan if it considers that such activity is no longer a priority.
In no case, however, shall any amendment of the Plan impair the incentives conferred
on a registered enterprise. ‘The IPAs shall not accept applications in an area of
investment prior to the approval of the same as a preferred area or after approval of its
deletion as a preferred area of investment in the Plan.

Upon approval of the Plan, in whole or in part, or upon approval of an
amendment thereof, the Plan or the amendment, specifying and declaring the areas of


investment shall be published in at least one (1) newspaper of general circulation and
all such areas shall be open for application until publication of an amendment or
deletion thereof,

All existing and future export enterprises in ecozones and freeports, and export
enterprise and strategic enterprises outside ecozones and freeport may only be granied
fiscal incentives under this Act: Provided, That the incentives granted under this Act
to aforementioned enterprises shall be applicable to the extent of the registered
activity or project only. Income derived from non-registered activity or project shall,
thus, be subject to appropriate taxes under the National Internal Revenue Code, as
amended. Provided further, that the period of availment of incentives shall be
reckoned from the start of commercial operations of the registered enterprise.

Registered activities for which fiscal incentives have been granted and are fully
utilized shall no longer be eligible for the incentives under this Act for the same
activities: Provided, that in the case of existing registered enterprises presently
enjoying Income Tax Holiday (ITH), the same shall continue to enjoy the said
incentives until its expiration, Provided further, the same shall not be extended.
However, the said registered enterprise, provided, it qualifies as an export enterprise
hereunder, may be granted the incentives under Section (14), or in the case of strategic
investments, under Section (15), provided the total period of incentives shall not
exceed fifteen (15) years for export enterprise, inclusive of the period of ITH
availment, or fifteen (15) years for strategic investments

SEC. 6. Incentives to Export Enterprises. — The export enterprises, may be qualified
to certain incentives depending on whether they are located inside or outside an
economic zone or freeport zone.

A. Located Inside an Economic Zone or Freeport Zone
Registered enterprises located inside an economic or freeport zone shall
choose among several packages of income tax-based incentives, depending on

whether these are registered under PEZA or not.

1, PEZA-registered enterprises may choose among the three packages of
income tax-based incentives, as provided below:

(a) ITH for a period not exceeding four (4) years; then,

()) 5% tax on GIE, in lieu of all national and local taxes,
except Value Added Tax (VAT) and Real Property ‘Fax
(RPT), fora period not exceeding eleven (11) years; or

(ii) 15% reduced tax on corporate income, in lieu of all
national and local taxes, except VAT and RPT, fora period
not exceeding eleven (11) years; or



(b) Five percent (5%) tax on GIE, in liew of all national and local taxes,
except VAT and RPT, for a period not exceeding fifteen (15) years
or

(© Fifteen percent (15%) reduced tax rate on corporate income, in
licu of all national and local taxes, except VAT and RPT for a
period not exceeding fifteen (15) years.

Except for the I'TH, the reduced rates on income tax enjoyed by
the export enterprise may be extended for another period not to exceed
fifteen (15) years subject to compliance of performance indicators that
shall be adopted by PEZA. Provided, that the ITH may only be granted
before any of the reduced rate is granted. Provided, further, that 'TH
may be granted for a non-renewal, non-extendible period of four (4)
years

2. Non-PEZA registered enterprises may choose among the two packages
of income tax-based incentives, as provided below:

(a) Five percent (5%) tax on GIE, in lieu of all national and local taxes,
except VAT and RPT, for a period not exceeding fifteen (15) years:
or

(b) Fifteen percent (15%) reduced tax rate on corporate income, for a
period not exceeding fifteen (15) years.

‘The VAT and customs duty treatment of imported capital equipment and
raw materials of registered enterprises located inside an economic zone or
freeport zone shall be as follows:

1, 100% exemption from VAT and customs duties on importation of
capital equipment, including consignment thereof.

2. 100% exemption from VAT and customs duties on importation of raw
materials, supplies, and semi-finished products, provided the same
form parts of the goods exported as a product of the registered activity
of the export enterprise,

B. Located Outside Economic or Freeport Zone

Registered enterprises outside economic or freeport zone shall choose
among the following income tax-based incentive options:



1. ITH for a period not exceeding four (4) years, then, fifteen percent
(15%) reduced tax on corporate income for a period not exceeding
eleven (11) years: or

Fifteen percent (15%) reduced tax rate on corporate income, for a
period not exceeding fifteen (15) years.

The 15% reduced tax rate on corporate income may be granted after
availment of the ITH, as may be determined by the IPAs; Provided, that the
total period of income tax-based incentives shall not exceed fifteen (15) years.
Provided, further that TH may be granted for a non-renewal, non-extendible
period of four (4) years.

The VAT and customs duty weatment of imported capital equipment and
raw materials of registered enterprises located outside an economic or freeport
zone shall be as follows:

1, 100% exemption on customs duty on importation of capital
equipment

Refund of VAT and customs duty paid on the importation of raw
materials, supplies, and semi-finished products, provided, the same
forms parts of the goods exported resulting from the registered
activity

C. VAT Treatment on Local Sales to Registered Export Enterprises

1. The sale of capital equipment, and raw materials and packaging
materials directly used in and form part of the direct cost of the
registered activity and forming part of the goods being exported, by a
VAT ~ registered enterprise to a registered Export Enterprise shall be
subject to zero percent (0%) VAT

Nv

The sale of services performed by subcontractors or contractors. in
processing, converting or manufacturing goods forming part of the
direct cost of an export enterprise and forming parts of the goods being
exported shall be subject to zero percent (0%) VAT, in accordance with
the provisions of the NIRC of 1977, as amended.

SEC. 7, Incentives to Registered Enterprises under the Strategic Investment Plan
Registered Enterprises may be qualified to the following incentives for a period not
exceeding fifteen (15) years

(a) Fifteen percent (15%) reduced tax rate on corporate income: and

(b) 100% exemption from customs duties on importation of capital equipment.


SEC. 8. Income Tux-based Incentives. ~ All regi

ered enterprises are required to file
their tax returns using the electronic facilities of the Bureau of Internal Revenue
(BIR). On availing the income tax-based incentives, the registered enterprise shall be
required to secure a Certificate of Entitlement from the appropriate IPA and attach the
same to its Income Tax Return (ITR) or Annual Information Return (AIR), whichever
is applicable

Pursuant to RA 10708, or the Tax Incentives Management and Transparency Act
(TIMTA), the registered enterprise shall file a complete annual tax incentives report of
their income-based incentives, VAT and duty exemptions, deductions, credits or
exclusions from the tax base with their respective IPAs within thirty (30) days) of
filing their tax returns. ‘The IPAs shall, within sixty (60) days from the end of the
statutory deadline for filing of the relevant tax returns, submit to the BIR their
respective annual tax incentives reports. Failure of the respective IPA to submit these
reports shall cause the forfeiture of the income tax incentive of the registered
enterprise for the taxable period

SEC. 9. Five percent (5%) tax on Gross Income Earned (GlE)and Fifteen percent
(15%)reduced tax on Corporate Income. The 5% tax on GIE shall be paid and
remitted by the registered enterprise located inside the ecozone or freeports as follows:

(a) 3% to the National Government
(b) 2% to the Local Government Unit/s

While the 15% tax rate on corporate income shall be paid and remitted by the
registered enterprises located inside the ecozone or freeport as follows:

(a) 10% to the National Government

(b) 5% to the Local Government Unit/s

Within six (6) months from the effectivity of this Act, the BIR, in consultation
with the IPAs, shall review its regulations on the computation of GIE to ensure that
only direct costs, or cost of goods sold or services rendered, shall be deductible from
gross revenues, and recommend stricter rules to the Secretary of Finance, if warranted.
10. Fifieen percent (15%) reduced tax rate on Corporate Income. The 15%
tax rate shall be based on the net taxable income with allowable deductions under the
NIRC of 1997, as amended.

VAT and Customs Duties Exemption on Capital Equipment. Importation
pital equipment or spare parts by registered enterprises may be exempted to the
extent of one hundred percent (100%) of the VAT or customs duties provided that the
following conditions are complied with



(a) The capital equipment or spare part is directly and reasonably needed and will
be used exclusively in and as part of the direct cost of the registered activity of
the Registered Enterprise, and are not manufactured domestically in sufficient
quantity, of comparable quality and at reasonable prices. Prior approval of the
IPA may be secured for the part time utilization of said equipment in a non-
registered activity to maximize usage thereof, provided the proportionate taxes
and duties are paid on a specific equipment and machinery in proportion to its
utilization for non-registered activities. If it shall be used for non-registered
activity of the registered enterprise at anytime within the first five (3) years
from date of importation, the registered enterprise shall first seek prior approval
of the Authority, and pay the taxes and customs duties that were not paid upon
its importation; and

(b) The approval of the IPA was obtained by the registered enterprise prior to the
importation of such capital equipment or spare parts.

‘The approval of the IPA must be secured before any sale, transfer, or
disposition of the capital equipment or spare parts which was granted tax and
duty exemption hereunder is made, and it shall be allowed only under the
following circumstances.

(a) If made to another enterprise enjoying tax or duty exemption on imported
capital equipment or spare parts;

(b) If made to another enterprise not enjoying tax and duty exemption on imported
capital equipment or spare parts, upon payment of any taxes and duties due on
the net book value of the capital equipment or spare parts to be sold:

(c) Exportation of capital equipment, machinery, spare parts or source documents
or those required for pollution abatement and control; or

(d)For reasons of proven technical obsolescence

Provided, that if the registered enterprise sells, twansfers or disposes the
aforementioned imported items without prior approval, the registered enterprise and
the vendee, transferee, or assignee shall be liable to pay twice the amount of the tax
or duty exemption that should have been paid during its importation: Provided
further, that even if the sale, transfer, or disposition of the capital equipment was
made afier five (5) years from date of importation with the approval of the IPA, the
registered enterprise is still liable to pay the taxes and duties based on the net book
value of the capital equipment if it has violated any of its registration terms and
conditions

SEC. 12. VAT and Customs Duty Exemption on Raw Materials. Importation of raw
materials, supplies, and semi-finished products by export enterprises inside the



ecozone or freeport may be exempted to the extent of one hundred percent (100%) of
the VAT and customs duties, provided that the raw materials, supplies, and semi-
finished products imported are exclusively used by an export enterprise in the
manufacture, processing, or production of the export products covered by. its
registered activity and it actually forms part of the product exported. Provided, further,
that the exemption herein may be granted only to that portion of raw materials,
supplies and semi-finished products forming part of the product actually exported

SEC. 13. VAT Refund Mechanism on Importation of Capital Equipment and VAT
and Customs Duty Refund on Importation of Raw Materials.

Regist
subject toa V.

ed export enterprises located outside the ecozones or freeports shall be
T and Customs Duty Refund Mechanism as provided in this /

ct

The VAT paid on imported capital equipment may be refunded provided that
the capital equipment is being used exclusively in and forms part of the direct cost of
the registered activity of the registered export enterprise

‘The VAT and customs duty paid on a particular shipment of raw materials may
be refunded to an amount equivalent to the proportion of raw materials used in the
production of the exported goods to the total raw materials imported multiplied by the
amount of VAT and customs duty paid on such importation, No claim for refund shall
be allowed on VAT and customs duty paid on raw materials which are not or no
longer intended to be used in the registered export activity and do not form part of the
goods exported under its registered export activity.

In order to facilitate the immediate processing, clearance, and release of VAT
and customs duty refunds as provided in this Act, a Trust Liability Account (TLA) is
hereby authorized to be established in the Bureau of Treasury (BTr). All VAT and
customs duty payments pertaining to the importation of registered export enterprises
of capital equipment, raw materials, or source documents in the case of IT export
enterprise shall be deposited in the TLA for the purpose of funding valid VAT and
customs duty refund claims. The claims for VAT and customs duty refunds shall be
made by the registered export enterprise with the Bureau of Customs (BOC).
However, the VAT refund shall only be granted upon obtaining a favorable
endorsement from the BIR

All claims for VAT and customs duty refunds shall be covered by the
procedures and rules and regulations existing under the National Internal Revenue
Code and the Customs Modernization and Tariff Act of the Philippines, and its
amendment. All amounts deposited in the TLA but no longer allowed for refund shall
immediately accrue to the general fund of the National Government.

SEC. 14. General Rules and Procedures for Registration. The IPA shall adopt rules
and regulations to facilitate action on applications filed with it; impose the terms and
conditions for such registration: prescribe criteria for the evaluation of applications;



devise standard forms for the use of applicants and, in the case of BOI, delegate to the
regional offices of the DTI the authority to receive and process applications for
enterprises located in their respective regions. Said rules and regulations shall be
guided by the following general provisions:

(a) Applications shall be filed with the concerned IPA and recorded in a
registration book and the date appearing therein and stamped on the application
shall be considered the date of official acceptance. All applications and their
supporting documents shall be confidential and shall not be disclosed to any
person except with the consent of the applicant or upon an order of a court of
competent jurisdiction.

(b) Registered Enterprises shall not be allowed to register their activity in more
than one (1) IPA. In the event that an enterprise shall transfer to another IPA,
only the remaining unutilized incentives may be granted to the enterprise or the
transferee, vendee or assignee.

(c) Every registered enterprise shall prepare a program for environmental
protection and Corporate Social Responsibility (CSR) covering the period of its
entitlement to fiscal incentives. Such Program shall be undertaken on a per
registration basis and shall be submitted as an accompanying document to the
application for registration to be submitted to the appropriate IPA.

(d) The following criteria shall be considered in the evaluation of applications for
registration under a preferred area:

i. Impact of the project on the overall economy:
ii, Overall viability of the project;
iii, The extent of employment generation;

iv. The extent to which technological advances are applied and adopted to
local conditions; and

Such other criteria as the Board may determine.

(c) The IPA may defer action on any application, and the same shall be considered
an official action. Provided, however, that the IPA may defer action to a
specific application not more than twice. A third deferment shall automatically
disapprove the said application.

(1) Upon approval, a registered enterprise under this Act shall be issued a
Centificate of Registration under the seal of the IPA and the signature of its
Chairperson or such other official or officer of the IPA as it may empower and


designate for the purpose. The certificate shall be in
IPA may determine and shall state, among other matter

ch form and style as the

i. The name of the registered enterprise;
ii, The activity in which the registered enterprise is proposing to engage: and

iii. The terms and conditions to be observed by the registered enterprise by
virtue of the registration.

SEC. 15. Vested Right. Any provision of law to the contrary notwithstanding,
incentives granted to existing registered enterprises pursuant to their certificates of
registration, contracts or agreements entered into with government instrumentalities
or corporations shall continue to be legally binding in accordance with the terms
and conditions stated therein for a period not to exceed five (5) years from the
effectivity of this Act; Provided, however that the registered enterprise may opt to
be governed by the provisions of this Act; Provided that such registered activity is
qualified under this Act; Provided, finally, that only the remaining unutilized
incentives shall be granted to the said enterprise. In such case, the said enterprise
shall be required to surrender its Certificate of Registration, which shall be deemed
as an express waiver of their privilege to apply for and avail of incentives
provided in the incentives law, under which they were previously registered.

SEC. 16. Suspension and Forfeiture of Incentives of Registered Enterprises,
Refund and Penalties; Waiver and Condonation. When there is probable cause to
believe that the registered enterprise has violated its registration terms and conditions,
the IPA may suspend its availment of incentives, until proven otherwise.

The IPA may impose fines and penalties or forfeit the incentives granted to the
registered enterprises whenever there are violations of the registration terms and
conditions by the latter, without prejudice to the cancellation of the registration of said
enterprise.

In case of cancellation of the Certificate of Registration granted under this Act,
the IPA may, in appropriate cases, require the refund of incentives availed of and
impose corresponding fines and penalties.

Any enterprise which violates any provision of this Act, its implementing rules
and regulations, the terms and conditions of its registration, or of any lawful directive
of the IPA, shall be subject to a fine not to exceed One Million Pesos
(Php1,000,000.00), without prejudice to the disapproval of its application for
registration or cancellation of its registration: Provided, That any commission of
fraudulent misrepresentation in its application for registration or submission of reports.
or gross violation of this Act and its implementing rules and regulations, a fine of at
least One Million Pesos (P1,000,000.00) but not to exceed Ten Million Pesos



(Php10,000,000.00) shall be imposed, in addition to other penalties that may be
imposed by the IPA

‘The IPA shall prepare a schedule of fines and penalties to be imposed on erring
registered enterprises based on the violation. In meritorious cases, the IPA may waive,
condone or reduce fines or penalties imposed on registered enterprises, provided that
the minimum compromise rate, in case of reduction, shall not be less than 40 % of the
basic assessed fines or penalties

Responsible officers of such enterprises, including duly appointed external
consultants-agents who commit, aid or abet the commission of any of the acts
mentioned above, shall be subject to a fine of not less than One Hundred Thousand
Pesos (Php100,000.00) but not more than Three Hundred Thousand Pesos
(Php300,000.00) without prejudice to disqualification from appearing or doing
business

Government officers and employees who participate directly or indirectly in the
commission of the foregoing acts shalll likewise be liable to a fine of not less than One
Hundred Thousand Pesos (Php100,000.00) but not more than Three Hundred
Thousand Pesos (Php300,000.00), in addition to any criminal and administrative
penalties imposable under the Civil Service Law, Revised Penal Act, Republic Act
No. 3019, otherwise known as the “Anti-Graft And Corrupt Practices Act”, Republic
Act No. 6713, otherwise known as the “Act Of Conduct And Ethical Standards For
Public Officials”, and other applicable laws

If the offender is a foreign national, in addition to the imposable fines and
penalties above, the foregoing acts shall be grounds for his summary deportation.

SEC. 17. Implementing Rules and Regulations (IRR). The DTI, DOF and NEDA, in
consultation with the IPAs, the BIR, and BOC and other concerned government
agencies, shall promulgate rules and regulations to implement the intent and
provisions of this Act within one hundred twenty (120) days from the effectivity of
this Act. Such rules and regulations shall take efifect fifteen (15) days following its
publication in a newspaper of general circulation in the Philippines.

SEC. 18. Separability Clause. The provisions of this Act are hereby declared to be
separable and, in the event any of such provisions is declared unconstitutional, the
other provisions which are not affected thereby, shall remain in force and effect.

SEC. 19. Repealing Clause. — The following provisions providing for incentives are
hereby repealed accordingly:

(a) Title I, Articles 26, 27, 28, 29, 30 and 31, Title III, Article 39 (a), (b), (©), (d),
(e), (2), (@), @, (W), (m) and (n); Title PV, and Book VI, Articles 77 and 78 and
Article 81 of Executive Order No. Series of 1987 titled “The Omnibus
Investments Code of 1987:”



(b) Sections 23 and 24 of RA No. 7916 titled “An Act Providing for the |
and Mechanisms for the Creation, Operation, Administration, And
Coordination of Special Economic Zones in The Philippines, Creating for the
Purpose the Philippine Economic Zone Authority (PEZA), and for other
Purposes (The Special Economic Zone Act of 1995):”

(c) Section 4 of RA No. 8748, titled “An Act Amending Republic Act No. 7916,
otherwise Known as the Special Economic Zone Act of 1995,”

(d) Section 17 (1) to (8) and Section 18 (a), (b), (©) and (f) of PD No. 66, titled
“Creating the Export Processing Zone Authority and Revising Republic Act
No. 5490;

(c) PD No. 529 (Restored by FIRB Resolution 19-87), titled “Granting to
Petroleum Exploration Concessionaires under the Petroleum Act of 1949
Exemption from Customs Duty and Compensating Tax on Importations of
Machinery and Equipment, Spare Parts and Materials Required for their
Exploration Operations,”

(f) Sections 8, 9, and 2“ Sentence of the 1° Paragraph and 2™ Paragraph of

Section 10 of PD No. 538, titled “Creating and Establishing the Phividec

Industrial Authority and Making it a Subsidiary Agency of the Philippine

Veterans Development Corporation, Defining its Powers, Functions and

Responsibilities, and for other Purposes;”

(g) Sections 36 (e) and (1) of PD No. 705, titled “Revising PD No. 389, otherwise
known as The Forestry Reform Code of the Philippines (Revised Forestry Code
of the Philippines);

(h) Section 16 (a), (b) and (c) and Section 17 (a) to (e) of PD 972 titled
“Promulgating an Act to Promote an Accelerated Exploration, Development,
Exploitation, Production and Utilization of Coal (The Coal Development Act
of 1976):

(i) Section 4 (a) and (d) of Presidential Decree No. 1442 - restored by FIRB
Resolution 19-87, titled, “An Act to Promote the Exploration and Development
of Geothermal Resources;”

G) Section 10 (1) to (6) of RA No. 7156, titled “An Act Granting Incentives to
Mini-Hydro Electric Power Developers and for Other Purposes” (Mini~
Hydroelectric Incentive Act);”

(k) Sections 16 and 17 of RA No. 7844, titled “An Act to Develop Exports as a
Key towards the Achievement of the National Goals towards the Year 2000
(Export Development Act of 1994);”



() Chapter XV, Section 83; Chapter XVI, Sections 90, 91, 92, 93 of RA No. 7942,
titled, “An Act Instituting a New System of Mineral Resources Exploration,
Development, Utilization and Conservation (Philippine Mining Act of 1995);”

(m) Section 9 of RA No. 8479 titled “An Act Deregulating the Downstream
Oil Industry, and for other Purposes (Downstream Oil Industry Deregulation
Act of 1998):"

(n) Section 3 (a) to (d) and (h) of RA No, 8502, titled, “An Act to Promote the
Development of the Jewelry Manufacturing Industry, Providing Incentives
Therefor and for other Purposes (Jewelry Industry Development Act of 1998):”

(0) Chapter Il, Article Ll, See. 35 (b), (c) and (d) of RA No. 8550, titled “An Act
Providing for the Development, Management, and Conservation of the
Fisheries and Aquatic Resources, Integrating All Laws Pertinent Thereto, and
for other Purposes (The Philippine Fisheries Code of 1998);”

(p) Executive Order No. 70 Series of 2012 amending EO No. 528, Series of 2006
and 313, Series of 2004 - “Reducing the Rates of Duty on Capital Equipment,
Spare Parts and Accessories Imported by BOL-registered new and expanding
Enterprises;”

(q)Section 4 (e) and (f) of RA No. 7903, titled “An Act Creating Special
Economic Zone and Free Port in the City of Zamboanga and Establishing for
this Purpose the Zamboanga City Special Economic Zone Authority,
Appropriating Funds Therefor, and for other Purposes (Zamboanga City
Special Economic Zone Act of 1995);”

(r) Section 1 and Sections 2, 3, 4, 5 and 7 of RA No. 9400, titled “An Act
Amending RA 7227, as Amended, otherwise known as the Ba
and Development Act of 1982, and for other Purposes;”

(s) Section 1 of EO No. 619, titled “
Zones Pursuant to RA No. 7916,
RA No. 7227, as Amended by

~reating and Designating Special Economic
s Amended by RA No. 8784, in Relation to
A No. 9400, Inside The Clark Freeport Zone;”

(0) Chapter II, Section 4 and-Chapter VIII, Section 19 of RA No. 9295, titled, “An
Act Promoting the Development of Philippine Domestic Shipping,
Shipbuilding, Ship Repair and Ship Breaking, Ordaining Reforms in
Government Policies Towards Shipping in The Philippines and for Other
Purposes (Domestic Shipping Development Act of 2004):”

(u) Sections 5, 6, and 10 of RA No. 9728, titled “An Act Converting the Bataan
Economic Zone Located in the Municipality of Mariveles, Province of Bataan,
Into the Freeport Area of Bataan (FAB), Creating for this Purpose the


Authority of the Freeport Area of Bataan (AFAB), Appropriating Funds
Therefor and for other Purposes (Freeport Area of Bataan (FAB) Act of
2009):”

(v) Subchapter V-A, Section 86 and Section 88 of RA No. 9593, titled “An Act
Declaring a National Policy for Tourism as an Engine of Investment,
Employment, Growth and National Development, and Strengthening the
Department of Tourism and Its Attached Agencies to Effectively and
Efficiently Implement that Policy, and Appropriating Funds Therefor (The
‘Tourism Act of 2009);”

(w) Chapter VII, Sections 15, 19, 21, 22 and 23 of RA No. 9513, titled “An
Act Promoting the Development, Utilization, and Commercialization of
Renewable Energy Resources and for other Purposes (Renewable Energy Act
of 2008);”

(x) Chapter V, Art. 60 and 61 of RA No. 9520, titled, “An Act Amending the
Cooperative Code of the Philippines to be Known as the Philippine
Cooperative Code of 2008;”

(y) Sections 5, 6, 7last paragraph), 8 and 9 of R. A. 9490, titled, An Act
Establishing the Aurora Special Economic Zone in the Province of Aurora,
Creating for the Purpose the Aurora Special Economic Zone Authority,
Appropriating Funds Therefor and for Other Purposes: Sections 3 (e) (f) (h)
and 4 of R.A. No. 10083, titled, An Act Amending Republic Act No. 9490;

(z) Section 4 (b) (c) of R.A. No. 7922, titled, An Act Establishing a Special
Economic Zone and Free Port in the Municipality of Santa Ana and the
Neighboring Islands in the Municipality of Aparri, Province of Cagayan
Providing Funds Therefor, and for other Purposes; and

(aa) Section 6 of R.A. No. 7459, titled, “Inventors and Invention Incentives Act of
the Philippines”

(bb)AIl other laws, acts, decrees orders and issuances or provisions thereof
inconsistent with any of the provisions of this act are hereby repealed or
modified accordingly
SEC. 20. Effectivity. This Act shall take effect fifteen (15) days following its

publication in the Official Gazetie ot in a newspaper of general circulation, whichever
is earlier.

Approved.