Fiscal perks seen to offset risks in hotel dev’t

MANILA, Philippines — The granting of incentives to tourism enterprise zones (TEZs) will offset the risks hotel developers incur in building projects across the country, a property consultancy said.

“The hardest sector and the least profitable sector of the property market is the hotel sector,” Leechiu Property Consultants (LPC) chief executive officer David Leechiu said.

“For the risk that you take, it’s not worth the money. That’s why very few hotels were built in the Philippines.”

Leechiu said the extension of the grant of incentives to TEZs, however, may encourage more investors to enter the hotel market.

“But that’s why we have to compensate the hotel developers. We have to make it easier for them to take the risk,” he said.

President Duterte earlier signed Republic Act 11262, which extends the grant of incentives to TEZs for another 10 years or until 2029 by the Tourism Infrastructure and Enterprise Zone Authority (TIEZA).

Among the incentives to be granted to TEZ developers and tourism enterprises include a six-year income tax holiday that may be extended for another six years, a five percent preferential tax on gross income in lieu of national taxes except for real property tax and fees of TIEZA, a net operating loss carry over scheme, import tax exemptions for capital goods and equipment needed for TIEZA-registered activities, and import tax exemptions for transport equipment and spare parts needed for TIEZA-registered activities.

They will also be exempted from value-added tax and excise tax goods imported by TIEZA-registered activities, tax credit equivalent to taxes paid on locally sourced goods, and tax deduction of up to 50 percent of cost of environmental protection and cultural heritage preservation activities as well as of sustainable livelihood programs of the registered tourism enterprises.

TIEZA said extension of the availment of the fiscal incentives until 2029 is projected to generate P222 billion in capital investments and 160,000 direct and indirect employment opportunities in the next 10 years.

Colliers International Philippines research manager Joey Roi Bondoc earlier said the extension of the grant of incentives is seen to spur hotel development outside Metro Manila.

“This should entice more investments into the leisure sector resulting in more hotels especially in key areas outside Manila,” Bondoc said.