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CHAPTER 6.
Future Outlook of Biofuels
Investments, Promotions and Incentives
	Investments in the production, distribution and use of locally-produced biofuels are encouraged with entitlement to applicable incentives and benefits under existing laws, rules and regulations. Such incentives are as follows:
	No specific tax per liter of volume capacity on local and imported biofuels; Exemption from value added tax (VAT) on the sale of raw materials used in the production of biofuels; Tax exemption of water effluents from biofuels production used as liquid fertilizer and other agricultural purposes, which are considered “reuse” under by RA 9275 or Philippine Clean Water Act; High priority given by government financial institutions to Filipino entities that produce, store, handle and transport biofuel and biofuel feedstock, including the blending with petroleum, as certified by the DOE.
	In support of DOE’s program, particularly on RA 9367, the Board of Investments (BOI) of the Department of Trade and Industry has listed in the 2007 Investment Priorities Plan (IPP) the following activities related to biofuels:
	Commercial production and commercial processing of agricultural products (i.e., the raw materials or feedstock for biofuels production) including their by-products and wastes, feeds and organic fertilizers, and establishment of post harvest facilities. Projects that cost at least the Philippine peso equivalent of US$20 million may qualify for pioneer status. (Under the Agribusiness Heading of the 2007 IPP) Production of biofuels, which may be integrated with blending, storage and handling. Activities involving either or a combination of blending, storage, handling and/or distribution of biofuels, however, are not entitled to income tax holiday (ITH). (Under the Energy Heading of the 2007 IPP).
	Applications for registration shall be endorsed by the Department of Energy that shall include projects’ compliance with world-class environmental standards.
	Manufacture of flexible-fuel vehicles (Under the Motor Vehicle Products Heading of the 2007 IPP) – vehicles that run on gasoline or diesel in combination with alternative fuel such as but not limited to:
	- Bioethanol vehicles that run on gasoline and a minimum ethanol content/blend of at least 20% - Biodiesel vehicles that run on diesel and a minimum biodiesel blend/ content of at least 10% Flexible-fuel vehicles may qualify for Pioneer status. Applicants must be registered participants of good standing under the Motor Vehicle Development Program of the BOI. Motor Vehicle Products
	This covers the manufacture or assembly of motor vehicles under the Motor Vehicle Development Program and the production of their parts and components.
	Manufacture/Assembly of Motor Vehicles
	Applicants must be registered participants of good standing under the Motor Vehicle Development Program of the Board. Projects complying with any of the following may qualify for pioneer status:
	a.	At least US$100 million (for passenger cars, commercial vehicles and buses) and US$4 million (for motorcycles) new investments, which may include acquisition of existing assets or facilities.
	b.	Exports at least 10,000 units (for passenger cars and commercial vehicle); 30,000 units (for motorcycle) and 500 units (for buses) per annum of completely-built-up (CBU) motor vehicles.
	c.	At least US$20 million (for passenger cars, commercial vehicles and buses) and US$1 million (for motorcycles) incremental investments for modernization and/or expansion projects.
	d.	Manufacture of generic vehicles that are designed and/or suited for the Asian market.
		Generic vehicles are those produced using a common platform such as, but not limited to, chassis; and should have the following features:
		- Vehicle model/variant should be produced in the Philippines and at least one other ASEAN country; - There should be resource sharing and/or pooling or industrial complementation of parts and components among countries that produce the model.
	e.	Manufacture and/or assembly of brand new three or four-wheel Philippine utility vehicles for cargos and/or passengers.
	f.	Manufacture of alternative fuel vehicle
	In addition, the Tariff Commission shall create and classify a tariff line for biofuels and biofuel-blends in consideration of WTO and AFTA agreements.
	FISCAL AND NON-FISCAL INCENTIVES
	Specific incentives are provided in the Biofuels Act, RA 9367, as earlier enumerated in this section. The other available incentives are as follows:
	BOI Incentives under EO 226 or the Omnibus Investments Code

		1.	Income Tax Holiday (ITH) for registered enterprises engaged in new, expanding and modernizing projects. Period of availment shall be as follows:
		New registered pioneer firms - 6 years from commercial operations. Registered projects locating in Less Developed Areas (LDA) - 6 years from commercial operation regardless of status (pioneer or non-pioneer) or type of project (new or expansion). New registered non-pioneer firms - 4 years from commercial operations. Expanding firms - 3 years from commercial operations of the expansion. Modernizing firms - 3 years from commercial operations of the modernization.
			Registered firms can avail themselves of bonus year in each of the following cases but the aggregate ITH availment (basic and bonus years) shall not exceed 8 years:
		The ratio of the total imported and domestic capital equipment to the number of workers for the project does not exceed US$10,000 to one worker; or The net foreign exchange savings or earnings amount to at least US$500,000 annually during the first 3 years of operation; and The indigenous raw materials used in the manufacture of the registered product must at least be 50% of the total cost of raw materials for the preceding years prior to the extension unless the Board prescribes a higher percentage.
		2.	Additional deduction from taxable income of 50% of the wages corresponding to the increment in the number of direct labor for skilled and unskilled workers in the year of availment as against the previous year for the first 5 years from the date of registration, if the project meets the prescribed ratio of capital equipment to the number of workers set by the Board of $10,000 to one worker and provided that this incentive shall not be availed of simultaneously with the ITH.
		3.	Employment of foreign nationals. This may be allowed in supervisory, technical or advisory positions for 5 years from the date of registration. The president, general manager, and treasurer of foreign-owed registered firms or their equivalent shall not be subject to the foregoing limitations.
		4.	Importation of consigned equipment for 10 years from the date of registration, subject to the posting of re-export bond.
		5.	Zero percent importation of capital equipment, spare parts, and accessories from the date of registration up to June 16, 2011, pursuant to the following conditions under EO 528:
		The machinery, equipment, spare parts, and accessories to be imported are not manufactured domestically in sufficient quantity, of comparable quality and at reasonable prices. They are reasonably needed and will be used exclusively by the enterprise in the registered activity. The approval of the BOI was obtained by the registered enterprise for the importation of such machinery, equipment, spare parts, and accessories before the purchase order was made or before the corresponding letters of credit were opened. Subject to reasonable allowance, the rated capacity of the machinery or equipment, if applicable, to be imported, is within the registered capacity of the enterprise.
		UNDER RA 7196 OR THE PEZA LAW
		1.	Income tax holiday or exemption from corporate income tax for 4 years
		2.	After the ITH period, option to pay 5% tax on gross income in lieu of all national or local taxes
		3.	Exemption from duties and taxes on imported capital equipment, spare parts, supplies, and raw materials
		4.	Domestic sales allowance equivalent to 30% of total sales
		5.	Exemption from wharfage dues and export taxes, imposts, and fees
		6.	Other incentives under EO 226 (Omnibus Investment Code)
		Note: A new policy was approved by the Philippine Economic Zone Authority (PEZA) to grant fiscal incentives to agro-industrial ecozone developers aimed at improving farmers’ lives and supporting the Biofuels Act of the country.
		UNDER RA 9337 OR R-VAT LAW
		1.	Zero rate for ethanol and biodiesel
		NEW INVESTMENT OPPORTUNITIES
		In relation to the mandated and targeted blend implementation, the establishment and development of the following are encouraged:
		Feedstock plantations Mills Conversion plants Depots/terminals Transport fleets Equipment sales and services Supplies distribution and sales Technical and sales services Manpower development
		SOCIAL AMELIORATION AND WELFARE PROGRAM FOR BIOFUEL WORKERS
		The Department of Labor and Employment (DOLE) shall promote gainful livelihood opportunities and facilitate productive employment through effective employment services and regulation. DOLE shall insure the access of workers to productive resources and social protection coverage; and recommend plans, policies and programs that will enhance the social impact of the Philippine’s Biofuel program. The establishment of the guidelines and mechanisms of social amelioration and welfare program (similar to RA 6982 or the Social Amelioration Act of 1991 for the Sugar Industry) for the biofuel workers will be developed. It is a production sharing scheme through lien collection that will augment the income of the said workers; finance socioeconomic programs to develop the livelihood and employment opportunities of the said workers; and promote their well being through welfare support assistance and/or interventions. Specifically, the program will pave the way for a more definite and clearer way for biofuel workers to have a share in the fruits of production in the form of social benefits such as but not limited to:
		- Training and Education Assistance; - Livelihood Assistance; - Social Protection and Welfare Benefits; and - Distribution of Financial Benefits
		ENFORCEMENT
		PROHIBITED ACTS
		Diversion of local or imported biofuels; Sale of biofuel-blended gasoline or diesel not in compliance with the minimum biofuel-blend; Distribution, sale, and use of automotive fuels containing harmful additives; Non-compliance with the PNS and DOE guidelines for biofuels and blends; False labeling of gasoline, diesel, biofuels and biofuel-blended gasoline/diesel
		PENAL PROVISIONS
		1-5 years’ imprisonment; A fine ranging from P1M to P5M; Confiscation of products that fail to comply with the requirements; Ceasing operations for refusal to comply; Administrative fines and penalties.



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