Makati Subway project gets tax perks

MANILA, Philippines — The government has granted a package of fiscal incentives to the P81-billion subway project in Makati City targeted to start operations in 2026.

The Fiscal Incentives Review Board (FIRB) yesterday said it has approved a four-year income tax holiday (ITH) for the rail operations of the Makati Subway.

After using up the ITH, the rail operator will get an additional five years of enhanced deductions on its corporate income tax (CIT), along with duty exemption for the importation of capital equipment and raw materials.

Finance Secretary and FIRB chairman Carlos Dominguez III said the incentives just apply to the rail operations. As such, income earned from other activities like the lease of advertising spaces and retail areas will be covered by the regular CIT rate and similar applicable taxes.

According to Dominguez, the FIRB authorized the provision of incentives to the Makati Subway on the economic gains that it will bring to Metro Manila’s transport system. Based on estimates, the subway project will increase work productivity by P24.4 billion a year starting 2026.

The FIRB, for its part, will monitor the projected benefits, including its counterpart risks, in line with the principles on extending tax perks under the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act.

Trade Secretary and FIRB co-chairman Ramon Lopez said the estimated boost in output should offset economic costs, such as forgone revenues, that the government will sustain.

Dominguez also instructed the Department of Transportation to work with the local government of Makati City in connecting the rail project to the Metro Manila Subway.

The Makati Intra-City Subway will connect 10 stations starting from Ayala Avenue and ending at the Ospital ng Makati. Undertaken as a public-private partnership between the local government and a consortium, headed by listed Philippine InfraDev Holdings Inc., it should be completed by 2025 and begin commercial operations the year after.

According to the consortium, the Makati Subway will service at least 700,000 passengers every day, unclogging the traffic buildup in many of the financial district’s roads during rush hours. Bulk of the financing to raise the infrastructure will come from a syndicate of foreign loans.

The FIRB, formed by the CREATE Act, is mandated to approve tax privileges given to new and expansion projects as part of efforts to reform the fiscal structure.

On the other hand, the CREATE Act brought down the CIT rate to 25 percent from 30 percent – the highest in Southeast Asia – but limited the grant of incentives to a maximum of 17 years or seven years for ITH and 10 years for additional tax perks.