THE Tourism Infrastructure and Enterprise Zone Authority (Tieza) estimates about P70-billion investments into the economy this year with the grant of fiscal incentives to tourism enterprise zones (TEZs).
“Though the foregone revenues are significant, these fiscal incentives will be able to encourage more investments into the tourism sector,” Finance Secretary Carlos G. Dominguez III said in a text message to the BusinessMirror. “It will create jobs for the people in and around the TEZs, alleviating poverty in many areas of the country, which is, ultimately, the aim of the Duterte administration.”
The Bureau of Internal Revenue (BIR) finally issued new revenue regulations (BIR Revenue Regulations 7-2016), which extended the fiscal incentives, and took effect last December 6. For his part, Tieza chief operating officer lawyer Guiller Asido added: “We continue to process applications for TEZs. Those which were approved already may immediately apply for a certificate of entitlement and avail themselves of [fiscal] incentives. If we are able to designate about 12 TEZs [this] year, we are looking at about P70 billion in investments.”
Among the fiscal incentives or TEZs are:
■ Six-year income-tax holiday (ITH) that may be extended for another six years;
■ As an ITH alternative, a 5-percent preferential tax on gross income in lieu of national taxes except for real property tax and fees of the Tieza;
■ In lieu of ITH or the 5-percent preferential gross income tax, a net operating loss carry over (Nolco) scheme;
■ Tax-free imports on capital goods and equipment needed for Tieza-registered activities;
■ Import tax exemptions for transport equipment and spare parts needed for Tieza-registered activities;
■ Exemption from value-added tax (VAT) and excise-tax goods imported for Tieza-registered activities;
■ Tax credit equivalent to national taxes paid on local goods and services procured by registered tourism enterprises (RTEs) for activity in TEZs, provided that input VAT will be allowed as credit against only output VAT; and
■ Tax deduction of up to 50 per-cent of cost of environmental protection and cultural heritage preservation activities, as well as of sustainable livelihood programs of RTEs.
Asido said the agency may also decide to grant incentives to tourism businesses outside of TEZs.
Said fiscal incentives were assured under Republic Act 9593, or the Tourism Act of 2009, but a revenue regulation was never issued by the Aquino administration on concerns that these incentives would further reduce government revenue. Because these fiscal incentives were not granted to TEZs, Tieza estimated about P232.33 billion in investments into the tourism sector were foregone from 2013 to 2016. (See “BIR revenue regulation sought to stem tourism investment losses” in the BusinessMirror, September 23, 2016.)
Ardent appeals by Tieza and its parent unit, the Department of Tourism (DOT), last year with the new dispensation at the Department of Finance and the BIR finally yielded the much-needed revenue regulations, assuring the further expansion of the tourism industry.
Even before the BIR revenue regulations were released, Tieza had already designated five flagship TEZs. These are San Vicente in Palawan, Rizal Park in Manila, Bucas Grande in Surigao del Sur, Mount Samat Shrine in Bataan and South Palms in Panglao, Bohol. It also approved six ordinary, private-sector-led TEZs: Ciudad de Victoria in Bulacan, Bravo Golf Resort in Dumaguete, Hijo Plantation in Davao, Queen’s Castle in Cebu, Resorts World in Parañaque and King Dome in Davao.
Asido said the agency also grants nonfiscal incentives not covered by the revenue regulation. These are the employment of foreign nationals, importation of professional instruments and household effects, special investor’s resident visa, foreign-currency transactions, requisition of investment, and the lease and ownership of land.
Formerly the Philippine Tourism Authority, Tieza is mandated to “designate, regulate and supervise the TEZs established under the [Tourism] Act; develop, manage and supervise tourism infrastructure projects in the country; supervise and regulate the cultural, economic and environmentally sustainable development of TEZs toward the primary objective of encouraging investments therein; and ensure strict compliance by the TEZ operator with the approved development plan;” among others.