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WHEREAS, there is need to encourage and hasten the establishment of hotel and other tourist oriented facilities necessary to meet the requirements of the tourist traffic;

WHEREAS, there is need to align incentives and requirements of Tourism Projects in line with the specific needs of the tourism industry; and

WHEREAS, it is realized that foreign investment and financing is required to meet the financial requirements of the said industry;

NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Philippines, by virtue of the powers in me vested by the Constitution, do hereby decree and order as follows:

SECTION 1. Title. — This Decree shall be known cited as the "Tourism Incentives Program of 1974”

SEC. 2. Declaration of Policy. — It is the policy of the State to encourage and promote tourism in the Philippines, particularly, in providing services to foreign tourist and travellers, in order to increase foreign exchange earnings and to hasten the economic development of the nation.

SEC. 3. Definition of Terms. — For purposes of this Decree:

1. "Philippine Tourism Authority" or simply “Authority” shall mean the Philippines Tourism Authority; as defined in its charter, Presidential Decree 189.
2. "Registered Tourism Enterprise” shall mean a person, corporation, partnership, or other entity organized and existing under the Philippine Constitution registered with the Authority in accordance with this Decree and engaged in or proposing to engage in rendering services to foreign tourists and travellers covered by the Tourism Priorities Plan, and subject to the guidelines prepared by the Department of Tourism.

SECTION 4. Tourism Priorities Plan. — Not later than the end of January of every year the Department of Tourism shall submit to the President through the National Economic and Development Authority a Tourism Priorities Plan setting forth the tourism activities to be encouraged and given priority and the tourism facilities required to supply the needs of foreign tourists and travellers. Incentives shall be made available to these projects.

SEC. 5. Incentives for Investors. — In addition to the incentives provided under this Decree, investors in registered tourism enterprises or projects shall enjoy the basic rights and guarantees set forth in Section 4 of Republic Act No. 5186, otherwise known as the Investment Incentives Act.

SEC. 6. Conditions for Availment of Tourism Incentives. —

1. No registered tourism enterprise shall be entitled to any incentive under this Decree until its registration shall have been approved by the Authority, which approval shall retroact to the date of filing of the application for registration.
2. To be entitled to registration, an applicant must satisfy the Authority—

1. that in case the applicant is a natural person, that he is a citizen of the Philippines; and in case the applicant is a partnership or other association, that it is organized under Philippine laws and that at least 60% of its capital is owned and controlled by citizens of the Philippines; or in case of a corporation or a cooperative, that it is organized under Philippine laws and that 60% of the capital stock outstanding and entitled to vote is owned and held by Philippine nationals as defined in Section 3 (f) of Republic Act No. 5186, and at least 60% of the members of the Board of Directors are citizens of the Philippines;
2. that applicant before engaging in any of the activities reserved by the Constitution or statutes to Filipino citizens or corporations owned and controlled by Filipino citizens applicants shall first comply with the requirements of the Constitution or statutes; and
3. that if the applicant will engage in an activity other than that for which it is registered, it undertakes to install an adequate accounting system to segregate the investments, revenues, sales, receipts, purchases, payrolls, costs, expenses and profits and losses of the registered operations.

3. In the case of registered tourism enterprises located in or whose sphere of activity is in Greater Manila, an average of seventy percent (70%) of its revenues must be in foreign currency, never falling below fifty percent (50%) in any given year within the period for which the incentives are granted and in the case of registered tourism enterprises located outside Greater Manila, or whose sphere of activity is outside the same, an average of fifty percent (50% ) of revenues shall be in foreign currency, never falling below thirty-five percent (35%) in any given year within the period for which incentives are granted.
4. Upon receipt of the application for registration, the Authority shall, within thirty (30) days, notify the applicant of all pertinent requirements not complied with and it shall act on said application within sixty (60) days after submission thereof.

SEC. 7. Joint Registration. — In cases where the hotel owners are not the hotel operators, both shall be allowed to register on a joint basis: Provided, That the hotel operators do not merely lease the hotel building or facilities from the owners: And provided, further, That the granting of incentives will not result in additional benefits to both or to one if treated as a single registered tourism enterprise.

SEC. 8. Incentives Available to a Registered Tourism Enterprise. —

1. Fifty percent (50%) of foreign exchange earned in the first five years from the start of operations shall be deductible from net taxable income, subject to other provisions of Section 10 of Republic Act No. 6135 and rules and regulations to be promulgated by the Authority.
2. A net operating loss incurred in any of the first ten years of operation shall be carried over as a deduction from taxable income for six years following such loss as provided for in Section 7(c) of Republic Act No. 5186.
3. A tax credit shall be granted for taxes withheld on interest payments on foreign loans as provided for in Section 7(f) of Republic Act No. 5186 and denned under Section 3 thereof.
4. Exemption from real estate taxes on land improvements and buildings shall be granted for the first five years from the start of operations.
5. Importations of machinery and equipment, and spare parts shipped with such equipment shall not be subject to tariff duties and compensating tax within seven years from the date of registration with the Authority subject to the other provisions in Section 7(d) of Republic Act No. 5186.
6. A tax credit equivalent to one hundred percent of the value of the compensating tax and customs duties that would have been paid on machinery and spare parts had these items been imported shall be given to the registered tourism enterprise who purchases machinery, equipments and spare parts from a domestic manufacturer, and another tax credit equivalent to fifty percent thereof shall be given to the said manufacturer subject to other provisions in Section 7(e) of Republic Act No. 5186, and denned under Section 3(j) thereof.
7. Undistributed profit or surplus which a registered tourism enterprise reinvests shall be allowed as a deduction from its taxable income in the year such reinvestments were made, subject to other provisions of Section 7(h) of Republic Act No. 5186, to the extent of:

1. 50% for expansion of registered tourism facilities within the Greater Manila Area;
2. 75% for expansion of registered tourism facilities outside of Greater Manila;
3. 75% for the expansion of existing registered tourism facilities in Greater Manila to additional facilities outside of Greater Manila.

SEC. 9. Incentives to Philippine Nationals Investing in Registered Tourism Enterprises Qualified Herein. —

1. An investment allowance shall be permitted as a deduction from the investor's taxable income to the extent of his actual investment but not to exceed ten percent thereof as provided for in Section 6 (a) of Republic Act No. 5186.
2. Exception from income tax on the portion of the gains realized from the sale, dispositions, or transfer of capital assets equal to the portion of the sales proceeds that is invested in new issues of stock of, or in the purchase of stock owned by foreigners, in registered tourism enterprises, within six months from the date the gains were realized, subject to the other provisions of Section 6(b) of Republic Act No. 5186.

SEC. 10. Incentives to Foreign National Investing in Registered Tourism Enterprises Qualified Herein. — Exemption from withholding tax on dividends remitted abroad to foreign investors shall be granted.

SEC. 11. Other Incentives. — Provisions in Section 10, 11, and 12, of Republic Act No. 5186 shall also be applicable to firms registered under this Decree.

SEC. 12. Suspension or Cancellation of Incentives. — The incentives provided for in this Decree may be suspended or cancelled in accordance with Section 13 of Republic Act No. 6135.

SEC. 13. Tourism Enterprises Registered Under Republic Act No. 6135. —Any enterprise registered under Republic Act No. 6135 at the time of the promulgation of this Decree shall continue to be governed by provisions of said Act and shall be considered automatically registered under the provisions of this Decree: Provided, That the incentives available under Section 8 (b), 8 (e) and 8 (f) herein shall only be applicable and shall be given prospective-effect from the date of its registration under this Decree: Provided, further, That enterprises registered under Republic Act No. 6135 not yet in operation upon the promulgation of this Decree may avail of all incentives granted herein by subsequent registration under the provisions of this Decree: Provided, furthermore, That all other incentives herein shall only be applicable to expansion of registered capacity.

SEC. 14. Applicablility to Existing Tourism Enterprises. — An enterprise which satisfies the requirements for registration specified herein, which at the time of promulgation of this Decree has not been registered under Republic Act No. 6135, shall be entitled to registration under this Decree as to its existing capacity. Similarly, an investor in such an existing enterprise shall be entitled to benefits and incentives to the extent of his present investment: Provided, That the application is filed while the area is still in the Tourism Priorities Plan: Provided, further, That the benefits of this Decree, so far as may lie applicable to such existing enterprises, shall be given prospective effect only from the date of registration: Provided, furthermore, That the incentives applicable shall only be those covered by Section 8 (a), for a period of 5 years after registration, Section 8 (b), 8 (e) and 8 (f) and, in the case of expansion of existing capacity, all other incentives shall be applicable only with respect to the expanded capacity.

SEC. 15. Certification of Registration. — All tourism enterprises registered under this Decree shall be issued a certificate of registration under the seal of the Philippine Tourism Authority and the signature of its Chairman and/or such other officer employee of the Authority as it may empower and designate for the purpose. The certificate shall be in such form and style as the Authority may determine and shall state, among other things:

1. The name of registered tourism enterprises;
2. The preferred area of investment in which the registered tourism enterprise is proposing to engage;
3. The nature of the activity it is undertaking or proposing to undertake, and the registered capacity of the enterprise; and (d) The other terms and conditions to be observed by the registered tourism enterprise by virtue of the registration.

SEC. 16. Implementing agency. — The Philippine Tourism Authority shall issue rules and regulations as may be necessary for the proper implementation of the provisions, of this Decree within 60 days after its approval. Such rules and regulations shall be effective 30 clays after their publication in two (2) newspapers of general circulation in the Philippines.

SEC. 17. Penal provisions. — The penalties shall be as those provided for in Section 19 of Republic Act No. 6135.

SEC. 18. Revealing clause. — All laws decrees, orders, rules and regulations or provisions thereof inconsistent with this Decree are hereby modified or repealed accordingly.

SEC. 19. Effectivity. — This Decree shall take effect immediately.

Done in the City of Manila, this 9th day of August, in the year of Our Lord, nineteen hundred and seventy-four.