| HOUSL OF REPRESENTATIVES

SEVENTEENTH CONGRESS OF THE REPUBLIC) RECEIVED
OF THE PHILIPPINES ) DATE: _OA.nN ones
First Regular Session ) tive:__&A 44,

BY:
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HOUSE BILL no l0e REGISTRATION UN

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Introduced list Representative JESULITO A. MANALO

AN ACT AMENDING CERTAIN PROVISIONS OF REPUBLIC ACT NO. 7471
AS AMENDED BY REPUBLIC ACT NO. 9301, ENTITLED "AN ACT TO
PROMOTE THE DEVELOPMENT OF THE PHILIPPINE OVERSEAS SHIPPING"
AND FOR OTHER PURPOSES

EXPLANATORY NOTE

On 5 May 1992, Republic Act (RA) 7471, otherwise known as the Philippine
Overseas Shipping Development Act was enacted. The said law, among others,
granted income tax exemption to Philippine shipping enterprises for a period of ten
(10) years from its enactment, subject to certain conditions, particularly that the
income subject of the exemption will be used for the construction, purchase, or
acquisition of vessels and related equipment and/or in the improvement of
modernization of its vessels and related equipment.

On 27 July 2004, RA 7471 was amended by RA 9301, extending the said
income tax exemption for a similar period of ten (10) years, which period is to expire
this year. The extension was sought after a strict interpretation of the definition of
“Philippine overseas shipping” disqualified Philippine overseas shipping companies
from availing of incentives.

RA 7471, as amended, undoubtedly supports the government's national
policy in promoting the development of Philippine overseas shipping. The
government must not lose sight of this policy, now, more than ever. Indeed, the
Philippines, being an archipelagic state, stands to benefit more if the overseas
shipping industry is further improved and expanded. Unfortunately though, there
are merely about 129 registered overseas vessels flying the Philippine flag at present.



The shipping sector needs to show and impress investors and business of
longer stability. For instance, ship mortgage loans taken by ship owners usually
have a 25 year payment scheme. Hence, it is necessary that assistance extended to
these ship owners through incentives, perks and privileges be granted for a longer
and more liberal period of time. This way, the present ship owners can enjoy the
benefits of the law, recoup their investments, and be enticed to further expand their
shipping business and operations. This, in turn, will most likely attract more
investors to go into Philippine overseas shipping. Extension of R.A. 9301 will also
enable the present Filipino ship owners and operators in the overseas trade to be
competitive with the Philippines’ neighboring countries if and when the Asian
connectivity and free trade arrangements come into force in the near future.

Additionally, for the Philippine ship registry to be able to compete with the
other ship registries like Panama and Liberia, the incentives given should be
institutionalized as they do in these other ship registries. Ship owners in these
registries do not pay income tax but instead pay tonnage tax.

‘The further extension of the income tax exemption granted to the Philippine
ship enterprise is one of the many ways that the government can help boost the
constant growth and development of the shipping industry.

The proposed bill will definitely allow Filipino ship owners to modernize the
country’s merchant fleet and provide stable employment to Filipino seafarers,
generate foreign exchange and contribute to the country’s economy in the form of
common carrier's taxes and the bareboat charter taxes paid to the government, not
to mention the huge foreign exchange remittances of its seafarers.

Likewise, this amendment is expected to encourage investment in ships and
generate more employment for seafarers, as our Filipino ship owners will have
increased capabilities to employ more people for its operations. Government will
save on foreign currency spending in transporting foreign trade (99% of the
Philippines’ foreign trade is carried by foreign flag ships) as more Filipino ship
owners will be able to become more competitive and efficient due to the fiscal
incentives given their way. Foreign exchange earnings will rise as more Philippine
flag ships will employ Filipino seafarers. The government will generate more
revenues by way of taxes, fees and charges (i.e. common carriers tax and bareboat
tax) not only as a result of an increase in the number of registered ships but likewise
from increased activities of ancillary businesses like ship manning, ship
management, ship chandling, cargo handling, ship agency and other businesses
engaged in the maritime industry,



With these amendments, it is hoped that the Philippine Shipping Industry
would have enough resources to improve its services and ensure safer and more

efficient operation.

X Ba ty-list Representative
~ ANGKLA


SEVENTEENTH CONGRESS OF THE REPUBLIC __)
OF THE PHILIPPINES )

First Regular Session )

HOUSE OF REPRESENTATIVES

oy
HOUSE BILL NO. lon

Introduced by ANGKLA Party-list Representative JESULITO A. MANALO

AN ACT AMENDING CERTAIN PROVISIONS OF REPUBLIC ACT NO. 7471
AS AMENDED BY REPUBLIC ACT NO. 9301, ENTITLED "AN ACT TO
PROMOTE THE DEVELOPMENT OF THE PHILIPPINE OVERSEAS SHIPPING"
AND FOR OTHER PURPOSES

Be it enacted by the Senate and the House of Representatives of the Philippines in
Congress assembled,

SECTION 1. Sec 7 of Republic Act No. 7471, as amended by Republic Act No.
9301 shall be read as follows:

“SEC. 7. Exemption from Income Tax. - A Philippine shipping
enterprise shall be exempt from payment of income tax on income derived
from Philippine overseas shipping from the date of approval of this Act:
Provided, That: The entire net income, after deducting not more than fifteen
percent (15%) thereof for distribution of profits or declaration of dividends,
which would otherwise be taxable under the provisions of Title II of the
National Internal Revenue Code, is reinvested for the construction, purchase,
ot acquisition of vessels and related equipment and/or in the improvement
or modernization of its vessels and related equipment in accordance with the
regulations.”

SECTION 2. Repealing Clause. - All laws, decrees, executive orders or rules
and regulations inconsistent with this Act are hereby repealed, amended or
modified accordingly.

SECTION 3. Effectivity. - This Act shall take effect after fifteen (15) days
following its publication in at least two (2) newspapers of general circulation.

Approved,