DTI bats for duty-free parts imports for Lufthansa aircraft repair unit

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TRADE Secretary Ramon M. Lopez said an aircraft maintenance and repair company, Lufthansa Technik Philippines (LTP), should enjoy tax-free and duty-free spare parts imports under the proposed Comprehensive Income Tax and Incentives Rationalization Act (CITIRA).

He said as an aircraft maintenance, repair and overhaul (MRO) provider, Lufthansa Technik, a unit of Deutsche Lufthansa AG, is effectively an exporter and must enjoy tax exemptions on parts it brings in, which are “raw materials.”

“That’s part of their business model. As long as they are exporting, it’s part of their operating cost. Kasama ‘yan doon sa aming request, doon sa aming position na kung exporter ka ‘yung inputs mo should be tax-free (The exemption is part of our request. It’s our position that exporters’ inputs should be tax-free) ,” Mr. Lopez told reporters Thursday.

He added: “‘Yung spare parts nila is part of their MRO, so parang raw material nila ‘yun (Spare parts are like raw materials in the MRO model)… So that has to untaxed.”

Lufthansa Technik has said that it is hoping for Congress to extend the provisions for duty and VAT-free raw materials in the current form of the bill to spare parts.

The bill, which will reduce the corporate income tax rate to 20% by 2029 from 30% currently and overhaul fiscal incentives, forms part of the administration’s comprehensive tax reform program (CTRP).

The Trade department announced in July that Lufthansa Technik is planning to invest $40 million to expand its facility at Villamor Airbase in Pasay City, saying this would help boost the Philippines’ efforts to become an aerospace and MRO hub.

The company’s expansion project was expected to create 300 more jobs in addition to current headcount of 3,200. — Arjay L. Balinbin