By Arjay L. Balinbin

COMPANIES registered with the Board of Investments (BoI) will continue to import capital equipment, spare parts and accessories at zero percent duty as President Rodrigo R. Duterte has issued an executive order (EO) extending the validity of the incentive for three years.

Signed on July 19, EO No. 85 — a copy of which was released to Palace reporters on Wednesday — extends the grant of zero percent duty on capital equipment, spare parts and accessories that is currently enjoyed by BoI-registered companies.

This incentive, according to the EO, will “enhance the attractiveness of the country as an investment destination and improve industry competitiveness, in line with the Philippine Development Plan 2017-2022.”

Covered imports should not be “manufactured domestically in sufficient quantity, of comparable quality and at reasonable prices” and should be “reasonably needed and… be used exclusively by the enterprise in its registered activity.”

Neither can the importer sell, transfer or dispose of the import concerned “without prior BoI approval” within five years from date of importation; else the business concerned will be liable to pay twice the amount of duty foregone or P500,000, whichever is higher, besides other penalties under EO 226, or “The Omnibus Investments Code of 1987”.

“Considering that importation of capital equipment is one of the major cost burdens of business enterprises in their start-up operations and expansion, there is a need to extend the zero duty on importation on capital equipment, spare parts, and accessories currently being enjoyed by BOI-registered enterprises,” the new EO stated.

The EO 85 succeeded EO 57, signed by Mr. Duterte on June 22 last year, which extended the incentive until July 6. EO 57 succeeded EO 22 of 2017, which in turn extended the same perk under EO 70 of 2012.

EO 85 is “valid for a period of three years” or until a law amending EO 226 is enacted.

“Any incentive that lowers the cost will of course help kasi it is a tax-free importation so it will encourage investors to expand,” Philippine Exporters Confederation, Inc. President Sergio R. Ortiz-Luis, Jr. said in a telephone interview when sought for comment.

He said this will give “relief” to those companies that will be affected by the planned overhaul of investment incentives under the proposed Tax Reform for Attracting Better and High-Quality Opportunities law.

“For those who are saying that they will be at a disadvantage when some incentives are withdrawn, this will give them some reprieve and at least they can prepare, those who will be negatively affected by the withdrawal of some incentives,” he said.

BoI locators also currently enjoy a four-to-eight year income tax holiday (ITH); a special tax rate of five percent on gross income earned after the ITH expires; exemption from wharfage dues, export tax, duty and impost fees; as well as less restrictions in the employment of foreign nationals.