Local producers enjoy zero tariff importation of capital equipment

The duty rate on capital equipment, spare parts and accessories for domestic manufacturers will finally be reduced to zero from the current one percent following approval in principle by the Cabinet-level Tariff and Related Matters (CTRM) committee.

The revision will be contained in a new executive order that will also extend the effectivity of EO 313 which previously extended tax and duty free incentives to export-oriented manufacturers, but maintained a one percent tariff for domestic manufacturers.

The decision to extend the tax and duty-free incentives for capital equipment, spare parts and accessories was deemed necessary since the bill rationalizing incentives remains pending in Congress.

It was also acknowledged that taxing capital equipment is an "up-front tax" on investors who still have to make their endeavor viable and profitable.

The government, however, will still give interested parties the opportunity to express their positions regarding the issue before the new EO is issued.

The government will extend the effectivity of EO 313 for another two years.

The DTI wants to restore the duty-free importation of capital equipment in the Omnibus Investment Act and has already submitted a proposed bill to Congress.

The Federation of Philippine Industries (FPI), however, has asked the DTI to set two conditionalities.

The first conditionality is that the tax and duty-free importation of capital equipment would be allowed only if the capital equipment to be imported is not produced locally, or is not in sufficient quantities and at comparable prices.

The second conditionality is that tax credits be given for purchases of locally produced equipment/parts.