DOF firm on five-year transition under CITIRA

    Refinements. The DOF is going by the approved House version which gives companies located in ecozones to shift to corporate income tax from the preferential 5 percent tax on gross income earned.
    Manufacturing hit in March. Production fell rapidly, while new orders and export sales declined at record paces. Job shedding continued, although the rate of decrease softened from March--report (Photo supplied)

    The Department of Finance (DOF) is firm on its position to have a five-year transition under the Corporate Income Tax and Incentives Rationalization Act (CITIRA), despite being open to refinements in the proposal rationalizing the country’s incentives system.

    In a press briefing last week, finance officials were asked about the Department of Trade and Industry’s (DTI) preference to have a longer transition period.

    “That’s one of the refinements that can be discussed, of course with consultations and everything. But I told them (DTI and Philippine Economic Zone Authority) that our position is five years, because that’s what’s in the bill. It’s passed by the House,” Antonette Tionko, DOF undersecretary, said in the briefing held at the DOF office in Manila.

    According to House Bill 4157 or CITIRA, existing registered activities granted an income tax holiday (ITH) shall be allowed to continue availing the incentive for the remaining period of the ITH or for a period of five years only, whichever comes first.

    “Provided, that the five percent tax on gross income earned (GIE) shall commence only after the ITH period has lapsed,” the bill states.

    “Provided, further, that the five percent tax on GIE shall be allowed to continue following the schedule stated herein: two years for activities enjoying the tax incentive for more than 10 years; three years for activities enjoying the tax incentive between five and 10 years; and five years for activities enjoying the tax incentive below five years,” it added.

    Last September, Ramon Lopez, trade secretary, said the DTI is proposing a minimum of five years as transition to all projects now enjoying the five percent tax on GIE.

    However, the DTI will be more generous to those exporting 90 percent of their products or are employing 3,000 by giving them a longer eight-year transition period.

    Last week, the PEZA board has voted to support CITIRA, after months of deliberation.

    Lopez, who is also PEZA board chair, presided over the special board meeting to push for the CITIRA, but with some refinements.

    Charito Plaza, PEZA director-general, said after the meeting: “There must be a happy compromise to end the agony which has created uncertainties affecting expansion plans and coming in of new investments.”

    Tionko, for her part, said: “The PEZA adopted the (resolution) to support the CITIRA. Of course, they’re going to work on refinements, together with us and the DTI. So of course, you know it’s just the House version, it’s going to go through refinements, but in principle, they’re (PEZA) supporting it.”

    In a statement earlier this week, PEZA said the agency and ecozone locators have created a technical working group (TWG) to come up with a final position paper incorporating the fine-tuned and enhanced provisions of the proposed CITIRA.

    Plaza said in the statement the TWG’s work involves the refinements of the CITIRA to address the concerns of the stakeholders on their operations as well as on possible job losses.

    The TWG was formed a day after the PEZA board agreed to support the CITIRA.