Quezon City Mayor Herbert Bautista FILE PHOTO
MANILA, Philippines—Quezon City Mayor Herbert Bautista has signed an ordinance that will grant fiscal and non-fiscal incentives to big businesses, including three to four-year tax holidays and special perks for medium and large enterprises (MLEs) employing city residents.
Bautista approved on July 18 the “Quezon City Economic Development Incentives Code of 2013” to encourage foreign and domestic MLEs to establish their businesses in the locality, to generate more jobs for Quezon City residents, and to further expand the locality’s revenue base.
Medium enterprises are described as businesses with total assets worth P15 million to P100 million while large enterprises are those with assets of more than P100 million.
Likewise the code, which applies to all direct foreign and domestic investments, aims to promote collaborative efforts between the city government and the private sector through public-private partnership programs.
According to the ordinance, which was enacted by the city council in April, “Data indicate that investors are more likely to locate their capital in destinations that offer an attractive combination of both fiscal and non-fiscal incentives in tandem with a strong business-friendly climate, which is best enhanced by means of good infrastructure, a fair judicial system, strong governance, attractive markets and an educated citizenry, among others.”
It cited the city’s declared policy of encouraging the “entry, expansion, diversification and modernization” of MLEs in various areas of the commercial, industrial and service sectors through incentive packages.
The measure further qualifies MLEs into pioneer and non-pioneer for the purpose of the incentives. It defines a pioneer enterprise as a business engaged in commercial scale manufacturing or processing, using its own design or method, of raw materials into finished products. It is also an enterprise, which produces non-conventional fuel or manufactures equipment using unconventional energy sources in production.
A medium enterprise will qualify as long as it has complied with local business requirements and at least 15 percent of its rank and file employees are bona fide residents of the city. Large enterprises are required to have 20 percent of its rank and file employees to be Quezon City residents to qualify for the incentives.
Among the non-fiscal incentives provided in the ordinance for pioneer and non-pioneer enterprises are the assignment by the Local Economic Investment Promotions Office of an account officer for their business operation requirements; the assurance of transparency in registering and qualifying for the incentives as well as of the city’s non-interference in its internal operations; and the facilitation of business registration as well as that of the employment of qualified foreign personnel for their efficient operations provided there is no Filipino worker qualified or available for the job.
Among fiscal incentives afforded medium and large businesses are tax holidays on real property; special deductions on gross income in computing the base of business taxes (P5 million for medium enterprises and P10 million for large enterprises); and exemptions from the payment of amusement tax as well as on the tax for the transfer of real property ownership. It also provides an exemption of a non-pioneer enterprise from the payment of closure of business or retirement fees on the condition that the shutdown is part of an expansion.
The incentives for pioneer enterprises will be for four years while they will apply to non-pioneer enterprises for only three years under the condition that the lands, buildings, and equipment taxed are “actually, directly and exclusively” used for the MLEs.
Special incentives provided by the ordinance depend primarily on the employment of bona fide Quezon City residents.
Medium enterprises are given an additional year on the tax holiday on real property and business taxes if at least 30 percent of their rank and file employees are city residents. They are given an extension of the tax holiday for two more years if 60 percent of their regular employees are residents. If their rank and file employees are all Quezon City residents, they are given an additional three years.
On the other hand, large enterprises are given an additional year on the tax holiday on real property and business taxes if at least 40 percent of their rank and file employees are city residents. They are given an extension of the tax holiday for two more years if 70 percent of their regular employees are residents. If their rank and file employees are all Quezon City residents, they are given an additional three years.
The measure also provides tax credits for the purchase of raw materials “actually, directly and exclusively used in production or operation,” where the total amount paid will be deducted from the MLEs’ business taxes. The tax credit will only apply if the raw material is bought from a business enterprise registered in the city.
However the Quezon City Economic Development Investment Board chaired by the mayor can order, after due notice and hearing, the MLEs to reimburse or return the fiscal incentives if they fail to comply with and maintain the requirements or if they are found guilty of misrepresentation so they could avail of the perks.