Fiscal Incentives - RA 7844 (Export Development Act)

Another major investment related law is RA 7844 or the Export Development Act of 1994 December 21, 1994). RA 7844 was enacted to promote and evolve export development into a national effort and make locally produced goods internationally competitive and to generate more foreign exchange.

In addition to the existing incentives provided by the BOI per EO 226, the following tax incentives shall likewise be granted to exporters:

1. Tax credit for imported inputs and raw materials primarily used for the production and packaging of export goods, which are not readily available locally, for five (5) years.

2. Tax credit for increase in current year export revenue computed as follows:
a. The first 5% increase in annual export revenue over the previous year would mean a credit of 2.5% to be applied on the incremental export revenue converted to pesos at the current rate;
b. The next 5% increase would be entitled to a credit of 5.0%;
c. The next 5% increase would be entitled to a credit of 7.5%;
d. Any increase in excess of 15% would be entitled to a credit of 10%.

Such tax credit is only granted for the year when the performance is achieved. Export revenues used in the calculation of such tax credits shall be subject to verification as prescribed under the implementing rules and regulations.