PROVIDING FOR INCENTIVES TO THE SHIPBUILDING AND SHIP REPAIR INDUSTRY

WHEREAS, the promotion and maintenance of an adequate
Philippine merchant fleet depend upon the adequacy of supporting
shipbuilding and ship repair facilities;

WHEREAS, the absence of adequate investment incentives has
deterred the expansion and modernization of existing shipyards and/or
the development of new shipyard facilities;

WHEREAS, to accelerate the development of shipbuilding and
ship repair industry such incentives are imperative and necessary;

NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the
Philippines, by virtue of the powers in me vested by the Constitution,
do hereby order and decree as follows:

SECTION 1. Shipbuilding and ship repair yards duly
registered with the Maritime Industry Authority shall be entitled to the
following incentive benefits:

1. Exemption from import duties and taxes.—The importation
   of machinery, equipment and materials for shipbuilding, ship repair and
   or alteration, including indirect import, as well as replacement and
   spare parts for the repair and overhaul of vessels such as steel plates,
   electrical machinery and electronics parts, shall be exempt from the
   payment of customs duty and compensating tax: Provided, however,
   That the Maritime Industry Authority certifies that the item or items
   imported are not produced locally in sufficient quantity and acceptable
   quality at reasonable prices, and that the importation is directly and
   actually needed and will be used exclusively for the construction,
   repair, alteration, or overhaul of merchant vessels and other
   watercrafts; Provided, further, That if the above machinery,
   equipment, materials and spare parts are sold to non-tax exempt persons
   or entities, the corresponding duties and taxes shall be paid by the
   original importer; Provided, finally, That local dealers and/or
   agents who sell machinery, equipment, materials and accessories to
   shipyards for shipbuilding and ship repair are entitled to tax credits,
   subject to approval by the Maritime Industry Authority, equivalent to
   the total tariff duties and compensating taxes paid for said machinery,
   equipment, materials and accessories.
2. Accelerated, depreciation.—Industrial plant and
   equipment may, at the option of the shipbuilder and ship repairer, be
   depreciated for any number of years between five years and the expected
   economic life.
3. Exemption from contractor’s percentage tax.—The gross
   receipts derived by shipbuilders and ship repairers from shipbuilding
   and ship repairing activities shall be exempt from the Contractor’s Tax
   provided in Section 91 of the National Internal Revenue Code during the
   first ten years from registration with the Maritime Industry Authority,
   provided that such registration is effected not later than the
   year 1990; Provided, That any and all amounts which would
   otherwise have been paid as con tractor’s tax shall be set aside as a
   separate fund, to be known as “Shipyard Development Fund”, by the
   contractor for the purpose of expansion, modernization and/or
   improvement of the contractor’s own shipbuilding or ship repairing
   facilities; Provided, That, for the this purpose, the
   contractor shall submit an annual statement of its receipts to the
   Maritime Industry Authority; and Provided, further, That any
   disbursements from such fund for any of the purposes hereinabove stated
   shall be subject to approval by the Maritime Industry Authority.
4. Registration required but not as Public Utility.— The
   business of constructing and repairing vessels or parts
   thereof shall not be considered a public utility and no Certificate
   of Public Convenience shall be required therefor. However,
   no shipyard, graving dock, marine railway or marine repair shop and
   no person or enterprise shall engage in the construction and/or
   repair of any vessel, or any phase or part thereof, without a valid
   Certificate of Registration and license for this purpose from the
   Maritime Industry Authority, except those owned or operated by the Armed
   Forces of the Philippine or by foreign governments pursuant to a treaty
   or agreement.

SEC. 2. The Maritime Industry Authority shall, in
consultation with the Board of Investments and the Department of
Finance, promulgate rules and regulations together with the procedures
and guidelines for the proper and efficient implementation of the above
provisions.

SEC. 3. Any violation of the tax exemption privileges or
incentives provided for in this Decree, as well as the terms and
conditions for the grant thereof, shall result in forfeiture of all the
tax exemptions and incentives granted herein and the shipbuilder, ship
repairer, contractor or importer shall be subject to two hundred percent
of all the taxes affected by the particular violation.

SEC. 4. Any provision of law, decree, executive order
or rules and regulations inconsistent with this Decree is hereby
repealed or modified accordingly.

SEC. 5. This Decree shall take effect immediately.

Done in the City of Manila, this 5th day of March, in the year
of Our Lord, nineteen hundred and seventy-five.