AAC Tax Code.

Subject to the conditions and period of availment in Sections 295, 296, and 296-A, respectively, the following types of tax incentives may be granted to registered projects or activities:

(A) Income Tax Holiday (ITH). — For all RBEs, exemption from income tax on registered project or activity imposed under this Code;

(B) Special Corporate Income Tax (SCIT) Rate. — For export enterprise, a tax rate equivalent to five percent (5%) based on the gross income earned, in lieu of all national and local taxes and local fees and charges.

The period of availment of the Special Corporate Income Tax shall be subject to the conditions set under paragraphs (A) and (B) of Section 296 of this Act:

Provided, That, if applicable, the shares of the local government units and the Investment Promotion Agencies under the special laws governing the latter shall be observed and shall not result in the diminution of their respective shares.

(C) Enhanced Deductions Regime (EDR). — For export enterprise and domestic market enterprise, the following may be allowed as deductions:

(1) Depreciation allowance of the assets acquired for the entity’s production of goods and services (qualified capital expenditure) - additional ten percent (10%) for buildings; and additional twenty percent (20%) for machineries and equipment;

(2) Fifty percent (50%) additional deduction on the labor expense incurred in the taxable year;

(3) One hundred percent (100%) additional deduction on research and development expense incurred in the taxable year;

(4) One hundred percent (100%) additional deduction on training expense incurred in the taxable year;

(5) Fifty percent (50%) additional deduction on domestic input expense incurred in the taxable year;

(6) One hundred percent (100%) additional deduction on power expense incurred in the taxable year;

(7) Deduction for reinvestment allowance to manufacturing and tourism industries. — When a manufacturing or tourism RBE reinvests its undistributed profit or surplus in manufacturing or tourism projects or activities, respectively, that are listed in the SIPP, no more than fifty percent (50%) of the amount reinvested shall be allowed as a deduction from its taxable income within a period of five (5) years from the time of such reinvestment;

(8) Fifty percent (50%) additional deduction on expenses relating to exhibitions, trade missions, or trade fairs; and

(9) Enhanced Net Operating Loss Carry-Over (NOLCO). — The net operating loss of the registered project or activity during the first three (3) years from the start of commercial operation, which had not been previously offset as deduction from gross income, may be carried over as deduction from gross income within the next five (5) consecutive taxable years immediately following the last year of the ITH entitlement period of the project.

(D) Duty exemption on importation of capital equipment, raw materials, spare parts, or accessories, including goods used for administrative purposes, of the registered project or activity;

(E) Value-Added Tax (VAT) exemption on importation and VAT zero-rating on local purchases; and

(F) RBE Local Tax. — The concerned local government unit may, through an ordinance issued by the concerned Sanggunian, impose an RBE local tax at the rate of not more than two percent (2%) of an RBE’s gross income, as defined under Section 27(E)(4), during the ITH and EDR, as provided under Sections 294(A) and (C) of this Code, respectively, which shall be in lieu of all local taxes and local fees and charges imposed by the local government unit under Republic Act No. 7160, otherwise known as the “Local Government Code of 1991”, as amended: Provided, That RBE local tax shall not be imposed on RBEs under SCIT.