AN ACT TO PROMOTE THE TEXTILE INDUSTRY OF THE PHILIPPINES BY EXEMPTING

Case Overview and Summary

Summary of Republic Act No. 4086

Exemption from Duties and Taxes for the Textile Industry
- Importation of natural and synthetic raw fibers, chemicals, dyestuffs, and spare parts, as well as the manufacture and sale of finished products thereof, by the textile industry in spinning, weaving, and finishing of raw fibers into yarn, thread, grey cloth, and finished fabric, shall be free from duties, special import tax, sales tax, and/or compensating tax, subject to the following conditions:
    - The imported materials are not grown, manufactured, or produced locally in sufficient quantities. (Section 1a)
    - The importer is a Filipino citizen or a registered textile manufacturer with at least 60% Filipino ownership, or employs alien technical or management experts with prior Presidential authority. (Section 1b)
    - The importer owns machinery and equipment for spinning, weaving, or integrated mills with spinning, weaving, and finishing facilities. (Section 1c)
    - The importer is registered with the Board of Industries. (Section 1d)

Period of Non-Payment of Duties and Taxes
- 100% exemption from duties and taxes from the date of approval until December 31, 1966. (Section 2a)
- 75% exemption from January 1, 1967, to December 31, 1968. (Section 2b)
- 50% exemption from January 1 to December 31, 1969. (Section 2c)
- 25% exemption from January 1 to December 31, 1970. (Section 2d)
- Full payment of duties and taxes starting January 1, 1971. (Section 2e)

Restrictions
- Imported raw materials, chemicals, dyestuffs, or spare parts shall not be sold, transferred, or conveyed in their raw form or as spare parts. (Section 3)

Special Textile Research Fund
- Textile manufacturers registered under this Act shall pay a special tax of 1% of their gross sales, as defined by the National Internal Revenue Code, to be used by the National Science Development Board for research, experiments, and studies to contribute to the local growth, production, or manufacture of raw materials needed by the industry, and to improve or invent machinery, equipment, processes, or production methods for the industry. (Section 4)

Exclusions
- Entities enjoying tax exemption under other existing laws shall not enjoy tax exemption privileges under this Act. (Section 5)

Penalties
- Violations, misrepresentations, or false reporting of taxable net income shall result in cancellation of registration, payment of twice the amount of duties and taxes involved plus penalties and surcharges, and imprisonment of not less than 2 years nor more than 5 years, and a fine of not less than ₱10,000 nor more than ₱20,000. (Section 6)

Repealing Clause and Effectivity
- All laws, executive orders, rules, and regulations inconsistent with this Act are repealed or modified accordingly. (Section 7)
- This Act shall take effect upon its approval. (Section 8)