THE PHILIPPINES is expected to see an uptick in investors from South Korea and Japan following the Senate’s concurrence in a free trade agreement (FTA) encouraging more of Seoul’s automakers to set up shop in the country, and the approval of a bill lowering taxes on foreign companies to 20% from 25%, according to a senator.
“This will pave the way for Korean companies to come into the Philippines to set up shop and would make it easier for Korean businessmen to get business visas under this agreement, meaning more jobs,” Senator Juan Miguel F. Zubiri, who heads the committee on economic affairs, told a forum at the Senate on Thursday.
The Senate on Monday concurred with the free trade agreement between the Philippines and South Korea, which will pave the way for increased exports of Philippine bananas and processed pineapples to Seoul.
Under the deal, the Philippines secured the elimination of 1,531 tariff lines on agricultural goods, of which 1,417 would be removed after the FTA enters into force.
It will also remove 9,909 tariff lines of industrial goods, 9,747 of which will be removed once the deal takes effect.
South Korean automakers are expected to benefit from the deal with the removal of the 5% import duties imposed on Korean-made automobiles. Tariffs on Korean electric and hybrid vehicles would also be eliminated within five years.
“Korean goods will be cheaper, but at the same time, our agricultural products will be more accessible in Korea… with less tariffs and less protectionist measures of the Korean government,” Mr. Zubiri.
Meanwhile, the senator said Japanese companies have shown interest in expanding their businesses in the Philippines due to streamlined tax incentives for export-oriented businesses proposed under the recently passed bill that provides export-oriented registered business enterprises (RBEs) with value-added tax zero-rating on essential services.
“Japanese companies that wanted to relocate, have said they wanted to expand here since the Bureau of Internal Revenue won’t have to charge them for local packaging,” said Mr. Zubiri, among the authors of the measure.
He earlier said Japanese companies threatened to leave the country after stalled Value-added tax (VAT) refund requests.
Congress earlier this month passed the Corporate Recovery and Tax Incentives for Enterprises to Maximize Opportunities for Reinvigorating the Economy (CREATE MORE) bill, which would set a local tax of 2% for RBEs based on gross income.
RBEs are provided with a 100% deduction on power expenses incurred in a taxable year, from 50% previously.
CREATE MORE will also grant RBEs with a capital stock of over P15 billion will be granted VAT zero-rating on local purchases, VAT exemption on imports, and duty exemptions on imports of capital equipment, raw materials, spare parts and accessories. — John Victor D. Ordoñez