Home » Aviation, Breaking News, Customs & Trade » New PH law scraps foreign carriers’ taxes

Philippine President Benigno Aquino III on March 7 signed into law a measure that exempts international carriers from payment of the common carriers tax (CCT) as well as the value-added tax (VAT).

Republic Act No. 10374, also known as the Common Carriers Tax Act, rationalizes taxes paid by international carriers in the country, and consolidated versions of House Bill No. 6022 and Senate Bill No. 3343.

The Office of the President in a statement published on its website said the new legislation exempts both air and sea foreign carrier from paying the 3% CCT imposed on passenger traffic, and VAT for the transport of passengers.

“The removal of CCT takes away the primary constraint on foreign carriers’ capacity growth and places the Philippines on an almost level playing field with that of other countries,” the statement said.

In his speech during the signing, the President said the law “will only bring in more traffic, and facilitate connectivity among our countries.

“Today, you witnessed the signing into law of Senate Bill No. 3343 or House Bill No. 6022. Once it takes effect, this law will exempt all international and shipping carriers from paying the three percent common carriers tax on receipts and income derived from transporting passengers. The carriers are also exempted from paying tax on the gross revenue derived from the carriage of passengers, cargo, or mail—provided that the same exemption is granted by the carrier’s home country to the Philippines,” he explained.

“With this bill, everybody wins from our aviation industries, to our tourism industries, to the millions of our peoples who will have greater freedom in planning their trips,” he added.

Rene Banzon, deputy general manager of SIA Engineering (Phils), said the law will not only bring down fares and attract more inbound tourists, but also “prevent carriers flying into the Philippines from getting turned off and eventually cutting their flights, like many of the European carriers did.”

For years, the passage of the legislation has been pushed by so many sectors in the business community, including the Joint Foreign Chambers of the Commerce of the Philippines and the Board of Airline Representatives.

Very recently, there was also a call by the private sector to scrap the aviation taxes. At the recently concluded Clark Aviation Conference, Jeff Pradhan, former president of the Clark Investors and Locators Association and current vice president for sales and marketing of Global Gateway Logistics City, presented the private sector’s wish list to fully develop Clark International Airport into a viable passenger and logistics hub. The list included abolition of the 3% CCT.

The taxes have caused foreign airlines to withdraw from offering services to the Philippines. The last to do so was Air France-KLM which dropped the only remaining direct flight from Manila to Europe (Amsterdam) in March 2012.

The law was signed during a travel convention at the SMX Convention in Davao. Present during the signing were Senator Franklin Drilon, Speaker Feliciano Belmonte Jr, and Tourism Secretary Ramon Jimenez.

Image courtesy of David Castillo / FreeDigitalPhotos.net

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