Lufthansa Technik Philippines has urged the government in Manila to change a proposed law aimed at tightening tax incentives for companies in special economic zones.
The Corporate Income Tax Incentives Reform Act is designed to make the incentives for priority and export industries in special economic zones "more targeted and time-bound", notes LTP chief executive Elmar Lutter.
"We can accept the phase-out of preferential income tax treatment, with a long-enough transition period, and lowering of the general corporate income tax rate in parallel," he says, but he adds: "We cannot accept, though, the phase-out of free-trade-zone provisions like exemption from customs duties and VAT [value-added tax] for parts in the MRO operations."
The bill's final version "has to be adjusted", argues Lutter. He suggests that the government's "omissions" of existing incentives may have been "unintentional" and can be "fixed relatively easily".
LTP has proposed changes to the government, and Lutter is hopeful that a revised version of the bill will be passed by year-end.
He is confident that if the government revises the bill, it will "very likely… not negatively impact the long-term perspective of the MRO industry in the Philippines".
Lutter warns, however, that "in a worst-case scenario... we would abandon the expansion in the Philippines".
LTP – a joint venture between Lufthansa Technik and local aviation services provider MacroAsia – is in the process of adding capacity at its site in Manila.
The site is focused on base maintenance for Airbus types – as Lufthansa Technik's main facility for A380 heavy checks – and Boeing 777s.
However, Lufthansa Technik is evaluating establishment of another base maintenance facility in Southeast Asia.
Lutter says the MRO group is looking at "different countries" in that region with a view to adding a facility in the medium term.