Expanded tax holidays for MSMEs under new Incentive Code OK’d

The Davao City Council has approved amendments to the city’s 31-year-old Investment Code, expanding tax incentives for Micro, Small, and Medium Enterprises (MSMEs) and broadening the scope of Priority Investment Areas (PIA).

Expanded Investment Opportunities in Davao City

Councilor Myrna Dalodo-Ortiz, the ordinance’s proponent, stated the amendments aim to ensure the city is prepared to attract a wider range of investments, including those utilizing modern technologies. She emphasized the need for the city government to offer compelling incentives to potential investors.

According to April Dayap, Head of the Davao City Investment and Promotion Center (DCIPC), the revised code provides a comprehensive definition of agri-businesses and includes retirement villages, star-rated hotels, theme parks, and convention centers as PIAs.

The PIA also encompasses sports tourism and various health-related businesses and services. For the technology sector, the code now includes Business Process Outsourcing (BPO) facilities, innovations, and new inventions. Eco-industries, such as electric vehicles, have also been added to the list of PIAs.

The new code maintains the existing PIAs from the 1994 Investment Code, which include agri-business, tourism, light manufacturing, property development, health, education, technology, eco-industry, infrastructure, and inclusive business activities.

Incentives for MSMEs

The amended code offers graduated exemptions from business tax for MSMEs operating within PIAs, with a maximum exemption of five years. The exemption schedule is as follows: 100 percent exemption for the first three years, 60 percent in the fourth year, and 40 percent in the fifth year.

Real property tax exemptions have been extended from two to three years for businesses in preferred investment areas. Exemptions from mayor’s permit fees have been increased from three to five years, excluding fees such as garbage collection, sanitary inspections, and electrical inspections.

MSMEs will also be exempt from amusement tax for four years, and exemptions on the transfer of Real Property Tax will apply to projects subject to amusement tax and included in PIAs.