TAX NOTES

BOI-registered new, expanding firms import capital equipment duty free

TO encourage new foreign investments to boost the Philippine economy, Executive Order 22, otherwise known as “Reducing the rates of duty on capital equipment, spare parts and accessories imported by the Board of Investments (BOI)–registered new or expanding enterprises” and its corresponding Implementing Rules and Regulations (IRR) were issued last April and May 2017, respectively.

BOI-registered enterprises with projects that qualify as new or expanding may import capital equipment, spare parts and accessories at zero percent duty importation, under the following conditions:

a) The capital equipment, spare parts and accessories to be imported are not manufactured domestically in sufficient quantity, of comparable quality and at reasonable prices;

b) They are reasonably needed and will be used exclusively by the qualified enterprise in its registered activity;

c) The approval of the BOI was obtained by the qualified enterprise for the importation of such capital equipment, spare parts and accessories before the release of shipment by the Bureau of Customs (BOC). Further, the application for importation shall be accompanied by a quotation or pro forma invoice in the name of the applicant as consignee to whom the shipment will be released; and,

d) Subject to reasonable allowance, the rated capacity of the capital equipment, if applicable, to be imported is within the registered capacity of the qualified enterprise.

Equipment, spare parts eligible

Under the IRR, capital equipment, spare parts and accessories subject to zero percent importation duty include but are not limited to rubber, textiles, constructional goods, glass, iron and steel, pipes and tubes, aluminum, mechanical tools and appliances, turbines and boilers, agricultural machineries, electric and industrial devices, motor vehicles, vessels and medical laboratory equipment.

To avail themselves of the duty exemption, the qualified BOI-registered enterprise shall submit an application with the BOI for the issuance of the Certificate of Authority (CA) for importations.

The CA contains the registration number and type of registration, date of application and issuance, validity period, quantity and description of the capital equipment, spare parts and accessories to be imported, and the applicable Asean Harmonized Tariff Nomenclature (AHTN) tariff code. The CA is non-transferable and shall be valid for a year from the date of issuance, unless invalidated or revoked.

The BOI-issued CA shall be submitted to the Department of Finance for an endorsement and thereafter, to the BOC, together with the official import documents such as the import entry declaration, commercial invoice and bill of lading.

Once granted the duty-free importation, the BOI-registered firm cannot sell, transfer or dispose of the imported capital equipment, spare parts and accessories within five years from the date of acquisition, without prior BOI approval. Failure to comply brings a penalty equivalent to twice the amount of the duty foregone or P500,000, whichever is higher.

This issuance shall be valid for one year, or until a law amending the Omnibus Investment Code of the Philippines is passed.

Source: P&A Grant Thornton

 

As published in SunStar Cebu, dated 4 July 2017.