Investment plan to adopt 2012 list

BECAUSE the investment priorities plan was released late last year, the 2013 version will adopt most of what was in the list in 2012, said Board of Investments Governor Oliver Butalid.

Butalid, who presented the proposed IPP guidelines during a public hearing yesterday, admitted that the 2012 IPP took effect a bit late in October instead of the target mid-year release because of policies in the mining and energy sectors that needed fleshing out.

He said they decided to continue with the same list this year, but with some guidelines refined and clarified. They hope to have the 2013 IPP signed by the President by the end of this month, which is why they hope industry stakeholders who have issues with the guidelines will make their positions known before March 20.

Last year, Butalid noted that Central Visayas enjoyed a 13 percent share in investments registered with the BOI, ranking third in the country with P46.81 billion.

It was higher than the investments made in the National Capital Region last year.

Foreign investments rose 218.77 percent from 2011, but the investments by local companies dropped 19.19 percent, dragging the overall project cost down 2.33 percent to P360 billion. However, there were 371 new projects in 2012, more than the 322 registered in 2011.

Butalid noted that the manufacturing sector dropped while the mining and quarrying sector “went down significantly” although the information and communications
technology/business process outsourcing sector continued to do well.

For this year, applications with project costs of P3 million or less are not qualified for registration.

“It’s not that we don’t want to support the micro and small enterprises, but historically, very few of them came to the BOI. This sector is better addressed by other programs,” he said.

As to the general rules on income tax holiday entitlement, the board introduced a new guideline giving priority to projects that benefit the economy. Projects entitled to a complete income tax holiday will be reviewed based on the project’s net value added, job generation, multiplier effect and measured capacity.

Reduce exemption

The guideline states that should the registered enterprise fail to implement the project as represented in its application, the board can opt to reduce the project’s income tax holiday proportionate to the actual performance.

“It doesn’t mean you’re not qualified. It just means you get a lower return of exemption,” said Butalid.

The new guidelines also clarified that the income qualified for the tax holiday is limited to the income directly attributable to the revenue generated from the registered project, not from the entire company.

The net income qualified for income tax holiday should not be a result of gross revenue exceeding 10 percent of the projected gross revenue placed in their application. In cases where the actual revenues exceed the projections, the board will increase the availment but companies are required to formally request for adjustments beforehand.

Fellow BOI Governor Geronimo Sta. Ana explained that they expect applicants to be serious with their projections, which is why they made this guideline. “We are not discouraging you to attain more sales. We want you to be careful in your projections.

If there are changes along the way, notify us in advance and we will consider and give you an ITH in excess of the 10 percent,” he said. Butalid added that it is best that they are notified at the end of the taxable year.

Enterprises with multiple registrations with the BOI are required to submit a list of cost items that are common with the qualified project and their cost allocation to ensure proper and fair allocation of common costs such as overhead and administrative costs. They explained that they want to segregate revenue and allocation costs to make sure the costs are not adjusted to favor projects eligible for the incentive.

Preferred activities

The 2013 IPP lists 13 preferred activities. These are agriculture/agribusiness and fishery; creative industries/knowledge-based services; shipbuilding; mass housing; iron and steel; energy; infrastructure; research and development; green projects; manufacture of motor vehicles; strategic projects; hospital/medical services; and disaster prevention, mitigation and recovery projects.

The agricultural sector covers commercial production, commercial processing and services in support of the sector such as irrigation, harvesting services and port-harvest facilities.

Butalid said they want to encourage entrepreneurs to support the farmers, which is why they hope enterprises will invest in such projects. Applications for registration for projects under this sector will only be accepted if it has the endorsement of the Department of Agriculture.

The 2013 IPP has removed contact centers from the list. Call centers catering to foreign clients have been placed under the export industry while call centers serving the local market are not eligible for BOI registration. They have also removed the creative industries and knowledge-based services from the pioneer status.

To encourage more trade among provinces, shipbuilding remains in the list and includes ships and boats at least 500 gross tonnage.

A shipbuilder noted that the incentives do not include raw materials, lamenting that 90 percent of the materials used to build ships are imported.

Sta. Ana assured they will take his comments into consideration. However, Butalid noted that while raw materials are not included, registration allows for tax exemptions for the importation of capital equipment. He said urged those who find it hard to pay for import duties to study the country’s free trade agreements with member countries of the Association of Southeast Asian Nations, China, India and Korea. The country also has agreements with New Zealand and Australia.

Biggest

Under mass housing, most of the guidelines remain the same. Butalid cited it as the biggest industry registered with them, in terms of the number of projects. The guidelines, though, reduced the period for income tax holiday for expansion projects in Metro Cebu and the National Capital Region from three years to two years.

Other new items include land mass transport using alternative fuel vehicles, modern passenger terminals, IT-enabled warehouses, and centers of excellence. They are also encouraging more applications from hospital and medical services, saying most applications were from Luzon. Butalid hopes this information is disseminated, saying it will be beneficial to medical facilities.;

Butalid said that this year’s IPP is very important for the country’s economy, as it has shown good growth figures for the past two years. While the Philippines has done well on consumption, Butalid said it is still better to see more stable investments that are sustaining to keep the country’s growth momentum.