KOROR (Palau Horizon) – The Senate approved another bill which will open the country to foreign investment.
The Senate passed on final and third reading a measure which establishes a new money management scheme to enable the country to reap long term financial benefits from the newly collected corporate taxes.
Senate Bill No. 8-42 establishes a procedure whereby certain tax revenues will be made available for reinvestment in certain qualified programs.
The bill called the “Reinvestment Incentive Act of 2009 is aimed at promoting the comtinued expansion of the tax base of the country.
The Olbiil Era Kelulau encourages the reinvestment of tax revenues generated from Palau Registered Corporations (PRC) to expand the Republic’s tax base.
“Providing reinvestment incentives is declared to be a public purpose. More specifically, it is in the public interest for the Republic to provide PRC with the financial means to expand their businesses via the reinvestment incentives created by this Act and thereby increase their taxable income, which, in turn, will accrue to the benefit of the Republic by enlarging its income tax base,” the bill stated.
The measure creates a development fund and under the bill, the specified amount of all of the PRC’s aggregate annual income taxes paid to the government shall be deposited by the Government within 30 days or receipt of taxes each calendar year into the Development Fund.
The specified amount shall mean for any PRC that incurs tax liability in any one year in an amount greater than $-0-, but less than $3,000,000: 80% of taxes paid; for a PRC that pays taxes in any one year in an amount greater than $3,000,000 but less than $7,000,000: 85% of taxes paid; for a PRC that incurs tax liability in any one year in an amount greater than $7,000,000 but less than $15,000,000: 90% of taxes paid:; for a PRC that incurs tax liability in any one year in an amount greater than $15,000,000: 95%, The specified amount may change from year to year for a PRC depending on the level of taxes for the corresponding year.
The Reinvestment shall constitute the amount of money invested by the Government as part of and pursuant to the Reinvestment Program set forth in Section 311 314 of this Chapter. The Reinvestment shall be paid to the Government from the Development after a time period to be specified by a contract between the Republic and the Authority.
The National Government of the Republic of Palau may assign all or any part of its rights to the repayment of principal and interest in the Reinvestment Program. The repayment of principal and interest accrued to the benefit of the National Government may be used to secure bonding or other forms of security for indebtedness of the National Government.
The bill also stated that any duly formed and validly existing PRC which does not engage in domestic operations within the Republic of Palau is eligible to apply for and receive a Reinvestment Certificate upon approval by the Palau Reinvestment Board. this Chapter and upon approval and recommendation of the Authority, the Palau Reinvestment Board is authorized to issue a Reinvestment Certificate prospectively, from the date of issuance, to qualify a PRC to participate in the Reinvestment Program. The Reinvestment Certificate shall be valid for period of up to ten (10) years from date of issuance.
