An Act to Invigorate the Country’s Export Trade as a Means of Accelerating Economic Growth by Granting Certain Incentives and Exemptions to Registered Export Producers, Export Traders, and Service Exporters, Repealing Export Incentives Granted Under Republic Act Numbered Fifty-One Hundred Eighty-Six, and for Other Purposes

REPUBLIC ACT No. 6135

An Act to Invigorate the Country’s Export Trade as a Means of Accelerating Economic Growth by Granting Certain Incentives and Exemptions to Registered Export Producers, Export Traders, and Service Exporters, Repealing Export Incentives Granted Under Republic Act Numbered Fifty-One Hundred Eighty-Six, and for Other Purposes

Export Incentives Act of 1970

Be it enacted by the Senate and House of Representatives of the Philippine Congress Assembled:

Section 1. Short Title. -This Act shall be known and cited as the "Export Incentives Act of 1970."

Section 2. Declaration of Policy. -It is the policy of the State to actively encourage, promote, and diversify exports of services and of manufactures utilizing domestic raw materials to the fullest extend possible, and to develop new markets for Philippine products, in order to attain a rising level of production and employment, increase foreign exchange earnings, hasten the economic development of the nation, and assure that the benefits of development accrue to the Filipino people.

Section 3. Definition of Terms. -For purposes of this Act:

Section 4. Export Priorities Plan. -Within one hundred twenty days after this Act takes effect, and annually thereafter as part of the annual investment priorities plan provided in Section 18 of Republic Act Numbered Fifty-one hundred eighty-six, known as the Investment Incentives Act, the Board shall submit to the President, through the National Economic Council, an export priorities plan setting forth the export products that should be encouraged with priority, considering:

The export priorities plan shall be acted upon and take effect, and may be amended, following the procedure for, and with like effect as, the said investments priorities plan.

Section 5. Incentives for Investors. -In addition to the basic rights and guaranties set forth in Section 4 of Republic Act Numbered Fifty-one hundred eighty-six, known as the Investment Incentives Act, investors in enterprises that are registered as export producers, export traders or service exporters shall enjoy the incentives set forth in Section 5 of the Act; and Philippine nationals investing in registered export producers that are pioneer enterprises shall also enjoy the incentives set forth in Section 6 of said Act.

Section 6. Conditions for Availment of Incentives.—

Section 7. Incentives to Registered Export Producers. -Registered export producers unless they already enjoy the same privileges under other laws shall be entitled to the incentives set forth in paragraph (h), (i) and (j) of Section 7 of Republic Act Numbered Fifty-one hundred eighty-six, known as the Investment Incentives Act; and registered export producers that are pioneer enterprises shall be entitled also to the incentives set forth in paragraph (a), (b) and (c) of section 8 of the said Act. In addition to the said incentives, and in lieu of other incentives provided in Section 7 and in Section 9 of that Act, registered export producers shall be entitled to benefits and incentives as enumerated hereunder:

Section 8. Incentives to Registered Export Traders. -A registered export trader shall be entitled (a) to the exemption from export tax provided in paragraph (e) of Section 7 of this Act; (b) to a tax credit equivalent to the amount of specific and sales taxes on the export products bought by it from registered export producers and subsequently exported; (c) for the first three (3) years from registration, to deduct from its taxable income, in addition to the normal deduction allowed by the National Internal Revenue Code, an amount equivalent to ten per cent (10%) of the increment of its total export sales over seventy-five per cent (75%) of its total 1968 export sales; and (d) thereafter, and until the fifth year after registration, to a similar deduction based on the increment of its annual total export sales over its average annual total export sales during the preceding five years. For a period of five years after registration, an additional deduction of one per cent (1%) shall be allowed a registered export trader who extends financial assistance to a registered export producer or producers in an amount equivalent to not less than twenty per cent (20%) of the registered export trader’s total export sales during the year in which the incentive is claimed.

Section 9. Additional Incentives.—

Section 10. Incentives to Registered Service Exporters. -Every registered service exporter shall, for the first five years from registration, be entitled to deduct from its taxable income an amount equivalent to fifty per cent (50%) of the increment of its total export fees during the year in which the incentives is claimed over seventy five per cent (75%) of its total export fees in 1969; and thereafter, and until the tenth year after registration, to a similar deduction based on the increment of annual total export fees over its average annual total export fees during the preceding five years: Provided, That to be entitled to this deduction, the registered service exporter must have remitted or repatriated to the Philippines its total export fees earned during the year in which the incentive is claimed, less reasonable costs and expenses incurred or payable in foreign currencies, under such rules and regulations as the Monetary Board may prescribe. In addition, for a period of ten years from registration, a registered service exporter who produces television or motion pictures, or musical recording, in the Philippines, and exports the picture or recording directly or through a registered export trader shall also be entitled (a) to a tax credit equivalent to the amount of specific, compensating and sales taxes and duties paid by it on the raw materials and supplies used in producing the picture or recording that is exported; and (b) to exemption from payment of customs duties and compensating taxes on importations of equipment, machinery or spare parts shipped with such machinery and equipment that (1) are not manufactured domestically in reasonable quantity and quality or sold at reasonable prices; (2) are directly and actually needed and will be used by the registered service exporter in producing or making the pictures or recordings that it exports; (3) are covered by shipping documents in the name of the registered service exporter to whom the shipment will be delivered direct by customs authorities; (4) have the approval of the Board of Investment obtained by the registered service exporter before placing the order for the importation; and (5) are the subject of international bidding, under the supervision of the Board, unless the Board dispenses with this condition for any of the reasons set forth in Section 7, paragraph (c) of this Act. If the registered service exporter does not bring into the Philippines export fees equivalent to at least the cost of the imported machinery, equipment and spare parts within five (5) years after delivery of the same to it, or if it sells, transfers, or disposes of the same or any part thereof, without prior approval of this Board, within said five (5) years, it shall pay twice the amount of the exemption given it, together with the penalty and interest thereon, computed from the date of delivery, fixed by the Tariff and Customs Code and the National Internal Revenue Code for delinquency in the payment of duties and taxes. However, the Board shall allow and approve the sale, transfer or disposition within the said period of five (5) years, if the registered service exporter has brought into the Philippines export fees during the period it has held the equipment which amount to twenty per cent (20%) of the cost of the equipment for each year in which it has held the equipment; and if made (1) to another registered service exporter of pictures and recordings; (2) for reasons of proven technical obsolescence; or (3) for purposes of replacement to improve or expand the operations of the registered service exporter.

Section 11. Export Assistance Fund. -One per cent (1%) of the total collections from the tax provided for by Republic Act Numbered Sixty-one hundred twenty-five, to be deducted from the portion allocated to the Development Bank of the Philippines, shall be set aside as an Export Assistance Fund which shall be administered by the Board and expended for in the pursuance of specific appropriations to be provided for in the annual General Appropriations Act to implement programs, projects and activities exclusively for the following purposes:

The Central Bank shall turn over and deliver, immediately upon collection, the portion of the tax constituting the fund to the Board.

Section 12. Incentives for Export Enterprises in Foreign Trade zones. -An export producer who manufactures, assembles or processes its products solely for export, an export trader, or service exporter within foreign trade zones that now or hereafter may exist by authority of law, if qualified and registered under this Act, is hereby extended the applicable benefits and incentives in this Act: Provided, That the particular products exported under a specific patent, trade mark or trade name are not manufactured, assembled, or processed by an existing licensee of such products in the Philippines.

Section 13. Suspension or Cancellation of Incentives. -Any provision of law to the contrary notwithstanding, the Board of Investments may suspend or cancel wholly or partially any export incentive granted under this Act whenever (1) there is any violation of this Act or of any law for the protection of labor; or (2) whenever any action is threatened or taken by an international association or foreign nation which would nullify the incentive, and would impair or threaten to impair the export trade of the Philippines or its relations with other nations; or (3) when the registered export enterprise has a paid-up capital of at least five hundred thousand pesos (₱500,000.00) and earns for at least two (2) years profits from its exports of products or services in excess of thirty-three and one-third percent (33 1/3%) of equity even without these incentives.

Section 14. Issuance of Implementing Rules and Regulations. -The Board of Investments shall issue such rules and regulations as may be necessary for the proper implementation of the provisions of this Act within sixty (60) days after its approval. For this purpose, and with a view to coordinating trade and industrial development, the Board may call upon other government agencies for assistance and cooperation. Such rules and regulations shall take effect thirty days after their publication in two (2) newspapers of general circulation in the Philippines.

Section 15. Expediting Export Procedure. -Subject to the approval of the President, the Board of Investments, in consultation with the National Export Coordinating Center, shall issue rules and regulations to expedite and simplify the procedure for exports of registered export producers, registered service exporters, and registered export traders, who are hereby exempted from the requirements of obtaining clearances or certificates from national or local governments or agencies for their export products imposed by existing laws, executive orders, ordinances, rules and regulations, and who shall be subject only to such requirements for clearances or certifications as may be provided in the said promulgated rules and regulations. The said rules and regulations shall take effect thirty days after publication in two (2) newspapers of general circulation in the Philippines.

Section 16. Suppletory Effect of Investment Incentives Act. -Republic Act Numbered Fifty-one hundred eighty-six, known as the Investment Incentives Act, as far as applicable and not inconsistent with the provisions of this Act, shall apply to enterprises registered under this Act.

Section 17. Enterprises Registered Under Republic Act Numbered Fifty-one Hundred Eighty-six. -Any corporation registered under Republic Act Numbered Fifty-one hundred eighty-six, shall continue to be governed by the provisions of said Act, but it shall have the option to register under the provisions of this Act: Provided, That the benefits of this Act, so far as may be applicable, shall be given prospective effect from the date of its registration under this Act. Provided, further, That nothing herein contained shall be construed to entitle further an enterprise to the benefits granted under Republic Act Numbered Fifty-one hundred eighty- six after its registration under this Act.

Section 18. Appropriations.—

Section 19. Penal Provision. -Violation of any provision of this Act, or of the terms or conditions of registration, or the rules and regulations promulgated pursuant thereto, or the act of abetting or aiding in any manner any such violation, shall be punished by a fine in the amount of not more that fifty thousand pesos (₱50,000) or imprisonment for not more than three (3) years, or both, at the discretion of the Court. If the offender is a government official, the maximum of the penalty hereinbelow prescribed shall be imposed and the offender shall suffer the additional penalty of perpetual disqualification from public office, without prejudice to any administrative action against him. Furthermore, where there is a clear case of favoritism or abuse of discretion, the members of the Board and the Chairman shall each be liable for such violation by a fine of fifty thousand pesos and imprisonment of not less than three years.

If the offense be committed by a juridical entity, its president and/or other officials responsible therefor shall be subject to the penalty described above. If the official be an alien, he shall be deported after serving the sentence, without need of further proceedings for deportation. If the offender is a naturalized citizen, he shall be automatically denaturalized from the date his sentence becomes final.

Payment of the tax due after apprehension shall not constitute a valid defense in any prosecution for violation of any provision of this Act.

Section 20. Repealing Clause. -Without prejudice to the right of any enterprise which, at the time of the effectivity of this Act, has been registered under Republic Act Numbered Fifty-one hundred eighty-six, known as the Investment Incentives Act, to be governed under the provisions of that Act, as provided in Section 16 hereof, or any other right acquired prior to the effectivity of this Act, Section 9 of Republic Act Numbered Fifty-one hundred eighty-six and those portions of Section 18 and 20 that make reference to exports are hereby repealed, and all Acts, executive orders, administrative orders, rules and regulations or parts thereof inconsistent with the provisions of this Act are likewise repealed or modified accordingly.

Section 21. Separability Clause. -The provisions of this Act are hereby declared to be separable, and in the event one or more of such provisions are held unconstitutional, the validity of other provisions shall not be affected.

Section 22. Effectivity. -This Act shall take effect upon its approval.

Approved: August 31, 1970.