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Philippine Bill Extends Shipping Income Tax Exemption

by Mary Swire,, Hong Kong

23 July 2014

With the Philippine Overseas Shipping Development Act expiring this year, a bill has been introduced into the House of Representatives, seeking to extend the expiring income tax exemption granted to the country's shipping industry.

Jesulito Manalo, a Vice Chairman of the House Committees on Labor and Employment, and On Science and Technology, and the son of a ship captain, raised the proposal through House Bill 4550 in order "to boost the growth, competitiveness and development of the local shipping industry."

"The Government must not lose sight of this policy now, more than ever," he said. "Indeed, the country being an archipelagic state, stands to benefit more if the overseas shipping industry is further improved and expanded. Unfortunately though, there are merely about 129 registered overseas vessels flying the Philippine flag at present." To date, he disclosed, foreign flagships still carry 99 percent of the country's foreign trade.

Manalo added that, for the local ship registry to be able to compete with the other ship registries like Panama and Liberia, ship owners should be provided with greater certainty in regards to the exemption, stating that it would "definitely allow Filipino ship owners to modernize the country's merchant fleet, generate foreign exchange, and also contribute to the country's economy in the form of common carrier's taxes and the bareboat charter taxes paid to the Government."

The Philippine Overseas Shipping Development Act was originally enacted in 1992 and extended in July 2004, when its terms were modified. It granted an income tax exemption to the country's shipping enterprises for a period of ten years, which will expire this year.

House Bill 4550 seeks the amendment of the Act so that "a Philippine shipping enterprise shall be exempt from payment of income tax on income derived from Philippine overseas shipping, [on the condition that] its entire net income, after deducting not more 15 percent thereof for distribution of profits or declaration of dividends, is reinvested for the construction, purchase or acquisition of vessels and related equipment and/or in the improvement or modernization of its vessels and related equipment." There is no new expiry date placed, as yet, on the extension of the tax break.

TAGS: tax | business | marine | corporation tax | Philippines | legislation | tax breaks | dividends | legislation amendments | trade

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