BOI readies draft EO for duty-free import of capital goods

The Board of Investments (BOI) is set to submit to Malacañang before May 14 a draft Executive Order extending EO 313 which grants duty-free importation of capital equipment to firms registered with the BOI.

The effectivity of EO 313 was for a period of two years from May 2004 to June this year.

The BOI has thus drawn up a new EO that would extend the applicability of EO 313. The main objective is to have the new EO effective immediately upon the lapse of EO 313.

Since the effectivity of EO 313, 40 firms covering 42 projects have availed of the capital equipment incentives under EO 313.

Projects that availed of the capital equipment incentive under EO 313 are those engaged in agriculture and allied services, processed foods and beverages, construction materials, textiles and garments, electronics, infrastructure and utilities, mining and mineral processing, iron and steel, motor vehicle manufacturing, shipbuilding, tourism, chemicals, information and communication technology (ICT) services, and health and wellness.

Under the draft EO, the duty rate on capital equipment, spare parts and accessories for domestic manufacturers is reduced to zero from the current one percent.

EO 313 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 will extend the effectivity of Executive Order 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.