"a) "Construction contractor" shall mean a natural or juridical person organized and licensed under Philippine laws, who undertakes or offers to undertake, or submits a bid to, or does himself or by or through others, construct, alter, repair, add to, subtract from, remove, move, wreck or demolish any structure, facility, project development or improvement, or to do any part thereof. The term contractor includes general engineering contractor, general building contractor and specialty contractor, construction management, engineering, and specialized consultancy group;
b) "Filipino contractor" shall mean a construction contractor, who is a citizen of the Philippines, or a corporation or other juridical entity, of which, in the case of a corporation at least sixty percent (60%) of its capital stock outstanding and entitled to vote, is owned and held by citizens of the Philippines and at least sixty percent (60%) of the Board of Directors thereof are citizens of the Philippines, and in the case of any juridicat entity, at least sixty percent (60%) of its equity is owned and held by citizens of the Philippines.
c) "Overseas project" shall mean a construction or consultancy project undertaken or will be undertaken by a contractor outside the territorial boundaries of the Republic of the Philippines, and paid for in acceptable or freely convertible foreign currency;
d) "Overseas construction operations" shall mean any activity related to an overseas project, including provisions of technical, managerial and highly professional services; and
e) "Board" shall mean the Philippine Overseas Construction Board created under this Decree.
a) Tax credit-(1) Taxes paid by the Filipino contractor to foreign governments on income derived from overseas projects subject, however, to the limitation of Section 30 (c) (4) (a) and (b) of the National Internal Revenue Code;SEC. 5. Internationally Bidded Local Projects.-The incentives provided in the preceding Section Four, other than that provided for in Subsection (c) thereof, shall be available to Filipino construction contractors participating as principal in internationally bidded or foreign-assisted projects, under such rules and regulations as shall be promulgated by the Board.
(2) Tax credit for taxes withheld on interest payments on foreign loans incurred directly and exclusively for overseas projects: Provided, That (i) no such credit is enjoyed by the lender-remittee in his country; and (ii) the overseas contractor has assumed the liability for payment of the tax due from the lender-remittee; and
(3) Tax credit equivalent to the sales or compensating taxes paid on domestically manufactured or produced materials or products which are purchased by the overseas contractor and actually exported by him to be used in his overseas projects: Provided, That the sales tax are indicated as a separate item on the sales invoice of the manufacturer or producer.
b) Deduction from gross overseas income.-(1) Accelerated depreciation-At the option of the Filipino construction contractor and in accordance with the procedures established by the Bureau of Internal Revenue fixed assets actually used in overseas operations may be: (i) depreciated to the extent of not more than twice as fast as the normal rate of depreciation if expected life thereof is ten (10) years or less; or (ii) depreciated over any number of years between five (5) years and expected life if the latter is more than ten (10) years. Such depreciation cost as may be chosen by the said tax payer shall be allowed as deduction from taxable income: Provided, That he notifies the Bureau of Internal Revenue at the beginning of the depreciation period which depreciation rate allowed by this Section will be used by him;
(2 Additional deduction of labor training expenses-An additional deduction from taxable income of one-half of the value of labor training expenses incurred for improving the performance and efficiency of unskilled labor: Provided, that such training program is duly approved by the Department of Labor: Provided further, That such deduction shall not exceed ten percent (10%) of the direct labor wage; and
(3) NNet operating loss carry-over-A net operating loss incurred on overseas projects in any year of operation may be carried over as a deduction from taxable income earned from overseas projects, within the three (3) years immediately following the year of such loss: Provided, That the loss carried over is computed net of incentives herein granted: Provided further, That no impairment of loans or guarantees extended by the Philippine Government or any of its instrumentalities has occurred or will occur as a result of overseas construction operations during the taxable year. The net operating loss shall be computed in accordance with the procedures established by the Bureau of Internal Revenue and shall be allowed only for purposes of income declaration in the Philippines.
c) In lieu of the income tax payable as a result of the application of the incentives provided for in the preceding subsections, the Filipino contractor may elect to pay a one and one-half percent (1 1/2%) tax on his overseas gross income.
a) Receive, process and approve, on such terms and conditions it may deem necessary to promote the objectives of this Decree, applications of construction contractors for registration under this Decree, and to impose and collect reasonable fees which shall be used exclusively to meet the operating and administrative expenses of the Board and in promoting its objectives;SEC. 12. Rules and Regulations.-a) The Board shall issue rules and regulations as may be necessary for the proper implementation of the general provisions of this Decree. Said rules and regulations shall contain, among others criteria for determining the eligibility of contractors and their principals to operate overseas and to avail of the incentives provided for in this Decree, Measures to avoid ruinous competition between contractors engaged in overseas construction projects, provisions to encourage the pooling of resources of construction contactors to enhance their competitive advantage in obtaining overseas construction contracts, provisions for the utilization of locally available materials and equipment in overseas construction projects, and measures to expand within a reasonable time, the ownership base of construction contractors by either a public offering of their capital stock entitled to vote, or the sale of such stock to their employees, or other measure to achieve such end.
b) Identify, in coordination with the Department of Foreign Affairs, overseas Employment Development Board, and Department of Trade, the projects, opportunities, and the countries where construction contractors may operate;
c) Determine, with the assistance of the representative of the private construction industry and the Department of Public Works, Transportatation and Communication from among the interested construction contractors those who will be allowed to bid for overseas projects;
d) Determine from among the registrant those who will avail of and are eligible for the incentives provided by this Decree and cause the granting of the same;
e) Check, verify, and evaluate at regular intervals, through the facilities of appropriate existing agencies, the performance of construction contractors engaged in overseas projects;
f) Check and verify periodically, with the assistance of other instrumentalities of governmment, by inspection of the books or by requiring regular reports or by some other method deemed most effective, on the compliance by construction contractors with the provisions of this Decree and rules and regulations issued thereunder;
g) Authorize, upon recommendation of the Department of Trade, the exportation of construction materials and equipment, subject to existing rules on exporatation;
h) After due notice and hearing, cancel the registration of, or suspend or cancel, or cause the suspewnsion or cancellation, wholly or partly, of the enjoyment of incentives and other benefits by any Filipino contractor, including the imposition of penalties as provided for under this Decree, for: i) failure by the contractor to maintain the qualifications required; or ii) for violation of any provision of this Decree and of other laws granting incentives and benefits to such contractors, or of the rules and regulations issued thereunder, or of any law or decree for the protection of labor; iii) for unjustified abandonment, incompetent management and administration of any overseas project awarded to such contractor;
i) Recommend or participate, subject to the approval of appropriate authorities, in the negotiation of bilateral or multilateral agreements that would facilitate the entry of contractors in overseas markets and to protect the interest of Filipino contractors and their workers operating overseas;
j) Formulate, examine, and implement, or cause the implementation thereof, a scheme or arrangement fro the protection of Filipino contractors from non-commercial risks with respect to their assets, equipment and other property held overseas in connection with approved overseas projects;
k) Obtain, collate, and evaluate information necessary for the effective discharge of its primary purpose and the proper exercise of its powers and functions:
l) Generally exercise all the powers necessary or incidental to attain the purpose of this Decree, including the promulgation of its internal rules and procedures governing meetings, organization and staffing.
i) Gather information needed to develop the overseas construction market;b) The exercise of the foregoing functions by special attaches shall be governed by the terms and conditions of an understanding or agreement between the Board and the Department of Foreign Affairs.
ii) Assist Philippine government agencies and Filipino overseas contractors in developing the overseas construction market;
iii) Monitor the performance of construction contractors overseas and submit relevant reports and recommendations to the Board;
iv) Perform such other duties as may be assigned to him by the Board.
(Sgd.) FERDINAND E. MARCOS President of the Philippines | |
By the President: | |
(Sgd.) JUAN C. TUVERA Presidential Assistant |