Significant Amendments in the Rules and Regulations Implementing the Intent and Provisions of R.A. 5186

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Part of Business Day Special Report

Title: Significant Amendments in the Rules and Regulations Implementing the Intent and Provisions of R.A. 5186
Language: English
Source: Business Day Special Report March 27, 1974
Year: 1974
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Fulltext: Page 2 Business Day March 27, 1974 SIGNIFICANT AMENDMENTS IN THE RULES AND REGULATIONS IMPLEMENTING THE INTENT AND PROVISIONS OF R.A. 5186 B. Section 3(h) “IF Applicant Is a Proposed Corporatlort'fPage 6) (New) In lieu of the requirements In (e), (f), (g) hereinabove, appli cant shall submit proof of financial capacity by majority stock holders entitled to vote. I. Rule I, Definitions and Basic Guidelines A. Section l(p) “Tax Credits” (page 3) Old Rule - Credits against Internal revenue taxes only B. Section 1 (r) “Start of Operations" (page 3) Old Rule - New Rule - when the enterprise begins when the ent Its production for commer- tlon of the re clal purposes commercial p New Rule — Credits against Internal revenue taxes and customs duties Section 3(1) "Submission of Contracts" (page 6) (New) such as Joint venture agreements, licensing patents, trademarks and technological assistance agreements, existing or proposed. Section 5, “Incomplete Papers” (page 6) A. Section 2(b) Capital Gains Tax Exemption (ownership and hold ing period) (Page 8) 5-year ownership and holding period, counted from date of act ual payment for new issues; ends on date of actual sale or disposition regardless of date of entry In corporate books Old Rule - applicant shall submit defi ciencies within 30 calendar days from receipt of notice by the Board within 30 days after filing of ap plications, the Board notifies the applicant of the deficiencies and the latter has 30 days from receipt of notice to comply; date of com pliance shall be date of official acceptance VII. Additional Incentives to Philippine Nationals Investing In a Pioneer Enterprise (page 9) A. Section 2(b), Investment for Tax Allowance Purposes Old Rule - may be voting or non-vot ing stocks of one or more pioneer enterprise New Rule — voting issues, voting or VIII. Incentives to Registered Enterprises (page 10) C. Section l(x) “Direct Labor Wage Cost” (page 3) New Rule — compensation (l.e., salaries, wages, payments, such as bonuses, living allowances which are part of the employee's taxable earn ings), for labor directly used in the production process including services of the foreman. It excludes labor for maintenance of production machinery and equipment. E. Section 6, “Publication of Appllactlon” (page 6) (New) once in a newspaper of general circuldtion at applicant s expense, after the Boardhas given due course for final evaluation of the application. A. Section 1 Who can avail Old Rule (Rule IX, Sec. 1) No provision D. Section (ly) "Local Raw Materials” (page 4) New Rule — Indigenous raw materials and seml-flnlshed products, (l.e,, with local content equal to or greater than 50% of manufacturing cost), directly and actually used in the manufacture/processing of the registered product that is completely finished and forming part thereof; excludes packaging and containers necessary to put the product In exportable form. IV. Rule IV, Board Action (page 7) A. Section 3, “Notice of Approval and Publication Qd Rule - (Rule VI, Sec. 1(c) New Ruleapplicant had only 20 days to accept the registration terms and conditions The Board shall publicly announce approved appllcaapplicant now have 30 days to accept the terms and conditions New Rule — U.S. owned/controlled corpor ations registered In non-ploneer, non-llberallzed areas cannot avail of tax incentives; Tax credits and accelerated de preciation for this purpose are not tax incentives Notlce of approval shall be published In a newspaper at applicant’s expense B. Section 3 Accelerated Depreciation (page 10) New Rule — acceleration refers only to the undepreciated cost of the fixed of registration may refer to fixed assets acquired before but not yet fully depreciated on date E. Section (lz) “Total Export Revenue” (page 4) (New) sum of all export sales of the registered product that Is complete ly finished and exported by the registered enterprise F. “Liberalized Areas" (page 4) (New) non pioneer areas which measured capacity, after 3 years of list ing In the plans have not yet been filled by Philippine nationals V. Rule V, Certificate of Registration (page 7) A. Section 1 “Conditions Precedent for Issuance of Certificate" Old Rule - New Rule — II. Rule II, Qualifications of Applicants (page 4) Old Rule (Rule III) - Nw Rule - U.S. owned/controlled corpora- U.S. owned/controlled corpora tions entitled to registration un- tlons, to be entitled for reglstrader same conditions prescribed tlon, shall submit proof ofrecipfor Philippine owned/controlled rocity; continued registration corporations; the former cannot after July 3, 1974 shall be subavail of tax Incentives under the ject to the resolutory effects of Act the Laurel-Langley Agreement Payment of registration fee compliance with the re quirement of Sec. 22(b) on the Issuance of two types of voting shares 3. sworn statement on all Information and data submitted resolution of applicant's Board of Directors accept ing the terms and condlcondition post-registration 5. compliance with pre-registration requirements 6. sworn certificate that appli cant Is not in arrears In the payment of obligations - proof of publication of III. Rule 111, Section 3 Supporting Documents A. Section 3(a), Copies of the Project Study (page 5) Old Rule — (Rule IV, Sec. 3(a) New Rule — applicant firm shall submit applicant firm shall submit 4 co10 copies to the Board pies to the Board Ing and approval VI. Rule VI "Incentives to Investors" (page 8) Old Rule — New Rule — No provision can be availed of only for invest ments made after registration C. Section 4, Net Operating Loss Carry-Over (page 10) Old Rule — New Rule — the 10-year period prescribed the 10-year period prescribed therein shall be from date the therein shall be from date the enenterprlse commenced oper- terprlse commenced commercial atlon even before its BOI operation of the registered activregistration ity irrespective of date of regisD. Section 5 Tax Credit for Withholding Tax on Interest (page 10) Old Rule - the Joan agreement and doc uments evidencing the regis tration of the foreign loan with the Board and Central Bank shall be sufficient basis for the BIR to issue tax credit certificates The BOI shall issue tax credit certi ficates upon proof that: 1. the enterprise assumes liability for payment of tax due from lender-remittee; no tax credit is enjoyed by the lender-remittee and for this purpose the following require ments shall apply: ATLAS COPCO a. where lender-remittee’s country has a law provldfor tax credit — (1) the enterprise must pres ent a duly authenticated ruling that lender-remit tee is disqualified due to its legal personality, (2) the enterprise must pres ent a duly authenticated certification of an Inde pendent auditor that lender-remittee has no taxable income; Keeping up the fight against noise and pollution Atlas Copco has stepped up researches into manufacturing equipment which could remedy, prevent and stop environmental pollution. We took the lead in designing a range of com pressed air products suitable for controlling noise and machine vibration, restoring “dead" lakes and preventing dust and oil pollution. To us, social responsibility is to the world and to you. That’s why we will always work for a cleaner, quieter and pollution-free environ ment to make this world a better place to live in. JltLas Copco COMPRESSED AIR CENTER ATLAS COPCO (PHILIPPINES) INC. b. Where lender-remittee's country has no Income tax . law a duly authenticated - certification of such fact must be submitted Section 6 Deduction for Labor Training (page 11) (new) requirements: submission of a labor training program proprlate agency or the BOI; approved by the ap2. prior Board approval for avallment of such deduction; 3. submission to the Board of a quarterly or semi-annual report of the training program IX. Rule IX Importation of Capital Equipment A. Section 3, Spare Parts (page 12) Old Rule (Appendix A, Sec. 3) New Rule — restricted to one set for the same as the old rule, but in genspecific machinery or equip- eral. the cost shall not exceed ment authorized to be Import-10% of the cost equipment where ed they will be used. B. Section 4, Conditions for Importation of Capital Equipment (page 12) Old Rule prior Board approval — before purchase order is New Rule — In addition to those mentioned In the old rule, the following conditions are Imposed: 1. Exclusive use or partial use (If registered activity does not fully utilize It but must not become the principal mode of utilization) I 2. International bidding or can- > passing (to ensure reasonable prices) except: total Importation less ufacturer; Importation Is caused the enterprise’s expan sion and equipment shall be acquired from the same supplier of the existing equipment; d. the Board has other means In determining the price C. Section 5, Validity of Authority to Import (page 13) (new) C/A valid for one year from date of Issuance D. Section 8, Post Approval Conditions (page 14) new) submission of official import documents which shall be used by the Board as basis for the issuance of a certificate of release from customs custody E. Section II, Prior Approval of Sale or Disposition of Equipment (page 15) Old Rule - (Appendix A, Sec. New Rule - 13) Prior Board approval Is necessary the enterprise shall notify the If transfer or disposition Is wlthBoard of the disposition or In five years from date of acquitransfer within 10 days from sition In order to exempt the date thereof, If said transfer transferor from the penalty of or disposition Is within five paying twice the amount of years from release by customs taxes waived If without Board prior approval, It shall notify the Board of such dlsposltlonland suffer the pevalld grounds for Board approval of the transfer: (a) sale to another registered en(b) proven technological ob solescence; (c) replacement to Improve and/ or expand registered operMarch 27. 1974 Businas* Osy Rule X. Purchase of Domestic Capital Equipment (page IS) New Rule 1. Domestic manufacturer — one whose product carries a "value added" and local content” at least equal to a prescribed percentage of the manufacturing cost. Giant Service. Service Giant. "value added” — defined as Including Indigenous raw materials, direct labor, fac tory overhead expenses, and depreciation but ex cludes profit of the dom estic manufacturer; value added must be at least 20% of production cost. value added —difference between manufacturing cost (which Includes raw mater ials, labor depreciation and factory overhead) and the value of raw material pur chases; value added must be at least 20% of manufactur ing cost (may be progress ively Increased by the Board as warranted by technolo gical advances and other "local content” means the difference between the man ufacturing cost (Includes raw materials, labor factory over head but excludes depreciamaterlal Importations; local content for equipment and spare parts where tariff Is 20% or less, local content shall be at least 20% of man ufacturing cost (may be pro gressively Increased by the Board); where tariff duties are higher than 20% — higher local content shall be prescribed by the Board; for computing local content, a component part Is consi dered locally manufactured even with the use of Imported raw material — If "local congreater than 50% of man ufacturing cost. Rule XI. Employment of Foreign Nationals No Changes Rule XII. Expansion Reinvestment Allowance (page 18) Old Rule 1. No provision because It Is expressly provided by law. 2. No express provision 3. No provision New Rule 1. Prior Board approval—for both expansion project and the act of reinvestment but approval and registration of a project shall not be deemed approval of an ex pansion plan made in the project study. 2. Expansion must result In an Increase In production capa city or any forward or back ward Integration approved by the Board; Thus mere "modernization" not deemed an expansion. 3. Epxanslon; when deemed affected — PROCESS OPERATORS PHILS., INC. a) Date of Reinvestment — deemed to have been made on the date the Issue of stock dividends has been duly approved by the stockholders c) for equipment previously authorized by the Board under Sec. 7(a), l.e. Tax Exemption on Importation of Capital Equipment, and Sec. 7(e), l.e. Tax Credit on Domestic Capital Equip ment, and Sec. 7(e), l.e. Tax Credit on Domestic Capital Equipment, or for civil works — upon actual Installation of capital equip ment or completion of ! 4. Earned surplus may come from registered operations 5. Date of Reinvestment — reca) date of approval by stock holders of declaration of stock dividends, If no fuspeclfled; b) the specified, future date of Issue unless Irrevocable transfer of a fixed amount of undistributed profit or earned surplus to capital account has been duly re corded in the books of re gistered enterprise prior to the actual Issue in whlcn case, the date of reinvestirrevocable book transfer; 6. Reduction of Capital Stock Reduction of capital stock takes place a) when there Is a formal decrease of subscribed capital stock; c) where stock dividends have been declared subject to approval of a pending Increase In the authorized capital stock, reinvestment date shall be the date of effectlvlty of approval by the SEC of such Increase. (page 19) b) when registered enterprise duclng said effect, such as purchase of its outstand ing stocks or the grant of advances to officers and/ or stockholders of enterprise. Reduction of capital stock — same rule except that the decrease of subscribed capital stock must be in accordance with the pro visions of Sec.. 17 of the Corporation Law: the grant of advances to officers and/or stockhold ers must be considered excessive. b) AG&P has supplied castings for every major Philip pine industry. Alloy cast steel ring gears and cast manganese liners for mining, and mill couplings, crystallizers, rotary kilns, pinions, roll shafts for the sugar industry are examples. Contents of Application to Reinvest (page 19) a) amount of profit or a) statement of surplus to be reinvested accumulated Modern quality control equipment combined with technical specialists guarantee the highest quality. b) specific purpose for re el other relevant Informmatlon. b) Get the benefit of more than 60 years of foundry experience. Get AG&P Capability. (Continued on page 26) IAIG1P FOUNDRY-MACHINE DIVISION Punta, Sta.Ana, Manila Telephone 70-86-41 Page 26 Business Day March 27. 1974 SIGNIFICANT AMENDMENTS IN THE RULES AND REGULATIONS IMPLEMENTING THE INTENT AND PROVISIONS OF R.A. 5186 registered enterprise In the (Continued from page 25) •) the capltalrlsk Invoved; f) availability or non-avallability of technology, domestic capital equip ment and Indigenous raw materials; g) the export potentials; h) Incremental labor In volved; I) cost of antl-pollutlon measures as required by the National Pollution Control Commission. manufacture of Its pro ducts except where the Board authorized part-time Utilization of such machiner ies and equipment for non registered operations of the enterprise. Indirect tax liability excluded (page 21) 4. No provision 4. Tax exemption privilege covers only direct tax liab ilities and excludes taxes transferred or passed on to registered enterprises either by business practice or mere contractual arrangement. Rule XIV. Special Export Incentives for Registered Enterprises: Appropriate percentage of tax decutlon (page 19) (New) Special Tax Credit (page 21) 1. Applicable only to direct exports 2. Export product must be a completely finished product 3. Coverage — means Inter nal revenue taxes only 4. No provision reduced Income Tax (New) (Page 22) 1. Applicable to direct and indirect exports thru other producers or export traders 2. No longer required because the export product may be an Input pf another export product 3. "Special tax credit” — equiv alent to sales, compensating and specific taxes and duties actually paid on the supplies, raw materials and semi-man ufactured products (whe ther Imported or locally purchased) by the registered enterprise for the manufact ure, processing or product ion of Its export products. 4. Time for filing application — within one (1) year from the date of actual exportat ion of final export product. No provision In the 1. old law because at the RULE XVA. Public Participation (New) (Page 23) a) Section 1. A registered enterphse, within one (1) year from registration shall offer to the public (Including alien Investors) 10% of Its total subscribed capital stock (voting or non-voting) and any increase thereof, unless exempt. the 1st three (3) months of offering shall be limited to Filipinos;period of offering shall be six (6) months from date of publication. c) a) publicly held corporations (l.e. those listed In the stock exchanges); b) corporations wholly owned or at least 70% con trolled by publicly-held corporations; c) stocks held by a substantial number of rank and 1) Items to be Imported are reasonably need ed by the Importer In Its registered oper ations; 2) the products, at the time of Importation are not nanufactured domestic ally In reasonable quantity and quality at reasonable b) The Board may require publication of the pro posed Importation at the expense of the applicant. a) For machineries, equipment, and component parts - prior Board approval must be obtained by enterprise before ord b) Fr supplies, spare par ~id raw materials — pur chase order may be made or letters of credit opened after filing application for importation with tbe Board; c) they are not manufactured domestically In reasonable quantity and quality at reasjr-able prices; d) they are reasonably and actually needed and will be used exclusively by the time, there were two other export Incentives — dou ble deduction of shipping costs and promotional ex penses, which are now reAppllcable only against taxable Income derived from registered export operations of the enterprise Available only for exports by a registered enteprlse of Its completely finished pro ducts for a period of five (5) years from date of registra tion unless suspended or can celled by the Board under the last paragraph of Section 9 (b) of the Act. RULE XV. Cancellation of Registration or Suspension of Incentive Benefits (New) (Page 22) Grounds for cancellation of registration — (a) failure to maintain qualifications ofr registration under the Act; (b) willful or grossly negligent violation of the Act, (c) of these rules and Regulations, (d) of the general and specific terms and conditions of registration for (e) of any law for the pro tection of labor or of the consuming public. Grounds for suspension of one or more Incentives — same as grounds for cancellation of registration depending on vlty of offense committed. 3. Hea. Ing committee — composed of at least two (2) Board members and the Director of Industry group concenred. 4. Decision; Right of Appeal — Decision of the Board shall be , based on findings and recommenadtlons of Hearing Commit tee which Is appealable within fifteen (15) days from receipt of (decision after which It shall become final. Mitsubishi. Marketing around the world. And across the board. As Japan's largest general trading company, we’re involved in just about every facet of trade. Marketing and distribution. Processing and transportation. Development of resources. Joint ventures. Investment and finance. And trading in some 10,000 different commodities— many of which do not involve Japan at all. In fact, of our U.S. $ 18,000 million annual turnover, a sizable percentage directly benefits countries throughout the world. And the world is where we operate. In 120 of its main cities we maintain offices, in addition to 140 domestic offices. And we're staffed by 19,000 employees. Some 1,400 of them are native to the area they work in. Backing our huge staff is 100 years of experience. And the kind of broad-gauge expertise that comes with our scale of activity. Detailed reports from our worldwide network enable us to adapt our skills and services to new needs everywhere. Now that we’ve gotten acquainted, let’s get together. We’d like to put our skills to work for you. MITSUBISHI CORPORATION u rtuutuer uj rann ana file employees of registered enterprises, not re lated within the 3rd civil degree of consanguin ity or affinity with majority stockholders; d) stocks held by ei ee’s trust funds, retire ment or pension approved by the Board. Trustee should be a Philippine national; 60% of the fund must accrue to the benefit of Philip pine nationals. Section 4.Shares to be offered (page 24) Common (voting) or preferred convertible to voting within five (5) years at the option of the stockholder; on non-callable basis but may be redeemable not earlier than five (5) years from date of Issue; shares need not be net original but secondary shares or treasury stocks are entitled to capital gains exemption under Sec. 5(b) or tax allowance under of the Act, terms of Public offering Consideration of the firm's future and historical earnings frequency of stock and cash dividends In de termining price offering; for preferred shares, the Board reserves the right to set minimum dividend returns but In no case less than 12% per annum and or require that such shares b be participating; subscription should be within the reach of small Investors. &.Procedural Requirements: submission of a prospectus within six (6) months from registration Indicating the following: a) pertinent data about the enterprise; b) description of shares to be Issued; c) terms of offering and mode of payment; d) highlights of operations and financial position for the past five (5) years; e) management profile; f) current ratio and other financial relationships; g) earnings per share; h) debt equity ratio; I) statement of BOI Incentives available; J) statement of SEC registration and exemption of sale fo securities. publication In a newspaper of general circulation and announcement to be posted In the GSIS, SSS and If offering ts limited to trust funds or employees, In lieu of a prospectus, submission of terms of offering and posting of notice In the office and factory pre mises shall be sufficient. 0 ne national; 60% of i benefit of PhilipsYntex SYNTHETIC TEXTILE MANUFACTURERS CO., INC. SHERIDAN ST., MANDALUYONG, RIZAL Tel. No. 78-49-61 to 65
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