Amending Certain Sections Of The National Internal Revenue Code Of 1939 For Incorporation In The Consolidation And Codification Of All Existing Revenue Laws Under A Presidential Decree No.

MALACAÑANG
M a n i l a

PRESIDENTIAL DECREE No. 1159

PRESCRIBING INCENTIVES FOR INVESTMENTS IN AGRICULTURAL ENTERPRISE

WHEREAS, it is our primordial objective to be self-reliant in our basic requirements for food and raw materials and in the implementation thereof also hasten our rural development and thus bring about a more equitable distribution of wealth for our people;

WHEREAS, it is necessary that we attain a mutually reinforcing balance in the development of the agricultural and industrial sectors of our economy;

WHEREAS, the accelerated development of the agricultural sector strengthens and stabilizes the economic, political, and social structure of the country by diffusing productive employment and income opportunities to the countryside while attaining self-sufficiency in basic food and raw materials, and increasing production of export crops and other products;

WHEREAS, agricultural endeavors are generally of a higher risk nature than industrial or commercial undertakings due to its exposure to natural calamities and the vagaries of whether, and thus require more and different incentives;

NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the...

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Summary of Presidential Decree No. 1159 (Agricultural Investments Incentives Act)

Objectives and Rationale
- Achieve self-reliance in basic food and raw material requirements, hasten rural development, and promote equitable wealth distribution (Preamble)
- Attain a balance in the development of agricultural and industrial sectors (Preamble)
- Accelerate agricultural sector development to strengthen economic, political, and social structure (Preamble)
- Provide incentives for agricultural endeavors due to their higher risk nature (Preamble)

Definition of Terms (Section 2)
- Defines key terms such as "Board of Investments", "Department of Agriculture", "Registered Agricultural Enterprise", "Pioneer Agricultural Enterprise", "Agricultural Investments Priorities Plan", "Preferred Areas of Investment", "Philippine national", "Foreign loan", "Foreign investments", "Measured capacity", "Tax credit", and "Capital stock".

Basic Rights and Guarantees (Section 3)
- Repatriation of investment for foreign investors
- Remittance of earnings for foreign investors
- Freedom to remit payments for foreign loans and contracts
- Protection from expropriation, with right to remit compensation
- Protection from requisition, with right to remit compensation

Incentives to Investors in Registered Agricultural Enterprises (Section 4)
- Protection of patents and proprietary rights
- Capital gains tax exemption for reinvestment in registered enterprises within 6 months

Incentives to Philippine Nationals Investing in Pioneer Agricultural Enterprises (Section 5)
- Tax allowance for investments up to 20% of taxable income
- Capital gains tax exemption for reinvestment in pioneer enterprises within 6 months

Incentives to Registered Agricultural Enterprises (Section 6)
- Deduction of organizational and pre-operating expenses over 10 years
- Accelerated depreciation of fixed assets and capital equipment
- Net operating loss carry-over for 6 years
- Tax exemption on imported capital equipment within 7 years
- Tax exemption on imported breeding stocks and genetic materials within 7 years
- Tax credit on domestic capital equipment purchases
- Tax credit for withholding tax on interest payments on foreign loans
- Employment of foreign nationals up to 5% for 5 years
- Deduction for expansion reinvestment up to 25%, 37.5%, or 50% for non-pioneer projects, and up to 50%, 75%, or 100% for pioneer projects
- Anti-dumping protection upon recommendation of the Board
- Deduction of labor training expenses up to 10% of direct labor wage
- Deduction of research and development expenses up to 10% of taxable income
- Incentives for necessary infrastructure and public facilities
- Deduction of freight and transportation expenses up to 30% for 5 years

Incentives to Pioneer Agricultural Enterprises (Section 7)
- Tax exemption from all taxes except income tax for 3-10 years
- Employment of foreign nationals for 5 years, with conditions
- Post-operative tariff protection up to 50% of dutiable value

Special Export Incentives for Registered Agricultural Enterprises (Section 8)
- Special tax credit for taxes and duties on supplies and raw materials used in export products
- Reduced income tax by deducting direct labor cost and local raw materials up to 25% of export revenue for 5-10 years
- Simplified export procedures under Presidential Decree No. 930

Preference in Grant of Government Loans (Section 9)
- Priority for financial assistance from government financial institutions
- Contribution to capital of registered enterprises to enable 60% control by Philippine nationals

Private Financial Assistance (Section 10)
- Registered enterprises may be beneficiaries of agrarian reform credit

Loans for Investment (Section 11)
- GSIS and SSS to extend 5-year loans at 6% interest for purchasing shares in registered enterprises

Applicability to Existing Enterprises (Section 12)
- Existing enterprises may register for expansion or enlargement
- Existing registered enterprises under other laws may transfer registration

Limitation on Incentives (Section 13)
- Incentives limited to registered activities
- Doubts resolved in favor of investors and registered enterprises

Board of Investments (Section 14)
- Implement the provisions of the Decree
- Draw up annual Agricultural Investments Priority Plan with Department of Agriculture
- Determine measured capacity in preferred areas
- Process and approve applications for registration
- Exercise necessary powers to attain the purpose of the Decree

Tax Credits (Section 15)
- Tax credit certificates issued by Secretary of Finance
- Non-transferable, but can be used to pay taxes and duties

Compliance with Other Laws (Section 16)
- Registration deemed compliance with General Order 47 and Presidential Decree 472

Effect of Investment Incentives Act (Section 17)
- Provisions of Republic Act 5186 (Investment Incentives Act) apply when not inconsistent

Exemption from Investment Limitation (Section 18)
- Exemption from 15% investment limitation in Corporation Law

Qualification of Applicants (Section 19)
- Requirements for registration, including ownership and control by Philippine nationals
- Conditions for registration of enterprises without required Philippine ownership

Special Assistance to Individual Applicants (Section 20)
- Government agencies to provide assistance to individual applicants

Appropriations (Section 21)
- 1 million pesos appropriated for Board and Department expenses for first year

Repealing Clause (Section 22)
- Repeals inconsistent laws, orders, and regulations

Separability Clause (Section 23)
- Provisions are separable if any part is declared unconstitutional

Effectivity (Section 24)
- Decree takes effect upon approval