Chapter 15 pEZA and BOI Registereq Enterprises i eo y of the government il folowing State policies and mandate in the 1987 Gone nto rrameie alls the |, Namely: 1) "The State recognizes the indis, private enterprise, and provide: Art. II) Pensable role of the ° i Private sect 'S Incentives to needs cristal led investments." (Sec. 20, 2) The State shall promote the preferential use of Filipino labor, domestic materials and locally produced goods, and ado it mi them competitive.” (Sec. 12, Art. XII) ae In pursuance of these policies, the government shall actively encourage, promote, induce and accelerate a sound and balanced industrial, economic and social development of the country in order to provide jobs to the people especially those in the rural areas, increase their productivity and their individual and family income, and thereby improve the level and quality of their living condition through the establishment, among others, of special economic zones in suitable and strategic locations in the country and through measures that shall effectively attract legitimate and productive foreign investments. DEFINITION OF TERMS: Special economic zones (SEZ) — hereinafter referred to as the ECOZONES, ae er taal with highly developed or which have the potential fo be developed into aor Se a tourist/yecreational, commercial, banking, investment and financial cen! ae Malte contain any or all of the following: industrial estates (IEs), export processing shall be managed and trade zones, and tourist/recreational centers. The ECOZONE ria term *Customs Operated ‘ORY. ‘a SEPARATE CUSTOMS TERRIT! fost gente a rational territory of the Philippines onto 7 prchioed boundaries of the ECOZONES except those areas sectiea sec one ant andior presidential proclamations to have the status of speci free ports.” 553Di » fi BO/ Registered. Exters,. PEZA a rie fren 0 tat of nd sbi ard doeopeg Ft feos eanwots management a4 wth pas canoer go at pet rr oy bg a feast se cf Pe cammaniy oes a a spied indus eset ph troy, ecnanty ofred ey ae ccna Indust estate (LE) — Sting ‘Export processing 20ne (eP2) rmatoals ee fom dats, axes and ober impor restrictions. ne — nied pond rea al oof ny a a, Fe a et ots ay be wot iets Cashing 2 at ead dor oerase ana wo beg sujet pg OH rel ol efter npr poss te fee toe seo a nach (enemy sabe ecto mot cates, nm ay Enlepises wn te zone at grated prerenatiaxteatentard imitans pg lenient Special economic zones were granted special tertory various tax and duty incentives such as under RA 7227 otherwise known as the “Bases Conversion ary Development Act of 1992" t enhance the benefits to be derived from the Subic any Clark miltary reservations... RA 7227 was later amended under RA 9400 ip ‘effectively extend the same benefits enjoyed in Subic to the Clark Freeport Economic Zone (Clark FEZ). Under this law, Clark FEZ is considered a customs torrtory separate and distinct from the Philippine Customs territory. Thus, 25 ‘opposed to importations into and establishments in the Philippines customs territory, which are fully subject to Philippine customs and tax laws, importations into and establishments located within the Clark FEZ (FEZ Enterprises) enjoy special incentives, including tax and duty-free importations. More specifically Clerk FEZ enterprises shall be entited to the Freeport status ofsthe zone and a 5% preferential income tax rate on its gross income in lieu of national and local taxes (Secretary of Finance and CIR vs. Ecozone Plastic Enterprises Corporation, GR No. 210588 dated Nov. 29, 2016 and RMC 38-2017 dated April 7, 2017), Business establishments operating within the ECOZONES shall be entitled the fiscal incentives as provided for under Presidential Decree No. 66, the lew creating the Export Processing Zone Authority, or those provided under Book VI of Executive Order No. 226, otherwise known as the Omnibus Investment Code of 1987. Furthermore, tax credits for exporters using local materials as inputs shal ery the same benefits provided for in the Export Development Act of 1994. 554 LEZ, AM ed BOY Rey , 2 TAXATION OF PEZA ReGistep Str Enter tie Generally, PEZA registred erjane ENTERPRise 5 ta + INCOME TAX HOLIDAY) PEZA registered ent ise sh taxes reckoned fom the sche an eM samen (New projet i loess fr Pears, eae Projects with a non for si (6) year, flows Expansion projects for tree 8) —— for four (4) years, PIONEER ENTERPRISE shay, * nonnnl ilasre ets espag Cersfoman oy elonet, ste ou mar eo Pa or fished ond wich sree arden pee 1 ergne ne itt gia, te a wt lege rl specs of psy a ee determined by the Board, in consultation eo Pe ‘sbi and hh esl oe tana o 1 Aeclated spc ratonal cod and Soc beneis of hep or beater gal v ton og stra pga rst cy waste ho pots ocrneio brn eugene cxnviotal sues oie oe cnn toon ful orsores low potin naan peas Prove, habe ra oa ay rg as ms imove isnt ses ego me or aoe rib mo soak ek ot re ee Pa fuer, Tt epg tr hal 2 tS i ean ga ep ane ete pot nT Meret 2 Non-pioner enterprise shalincde al gsr pce rs eran Pioneer enterprises PEzirgltedenerprses ae equed serue nO Income Tax Holiday and incentves, , attachment to their Annual Income Tax Retum with the BIR as prot he entitlement to their tax incentives, ‘of EOOZONE The tax incentives shall apply to registered Meo enterprises during period of registration wih PEZA FY eg tion ject to the NIRC provisions. oe apo. reper Unrelated Activites wil be subject to: 555PEZA and BO Refistered t Ente 108 INCOME 5% SPECIAL TAXON GROSS INCOME snierpices ae eu ‘ater the ITH period, PEZA oni Speci Tax on Gross Income and IN LIEU of al ta % Specal Tax on Gio HRN 7498)..“GOSS Income" eter a es Sr peared rm th registered acy. net of soles ae 28 gross rovers Seg and mins StF S228 Or drect costs acc, ae aduton made fr adinstraive expenses orinctental nag Me a given taxable period) ry National ang 5% FORMULA IN COMPUTING THE GROSS INCOME: Gross slesrevenves oe Less | sles scours Sales returns and allowances Gay Netsales Les: Cost of salesiict costs Gross incom ines hepa Sl oioGon saree eve fm Bessy wi eae rea aaa mis let as cee zr tf al se, marge and eps ee a eran gentry ie 1-2) ‘Alowable Deductions from Gross Income Earned for purposes of computing the 5%, tax (RR 11-2005) 4% ECOZONE Expr Enlerises, Free Trade Enterprises and Domestic Make Enters = Direct salaries, wages ot labor expenses Production superisin salaries Raw matele usd inthe manufacture of products Decrees in Gods in Process Accourt(nermedate Goods) Decrease in Fished Gods Account Supplies and Fuels sed in roducion Depredaton of Machinery and equpment used in production and that porton othe bung owned or ensued thats used exclusively inthe production of goods ‘+ Rent and uty charges associated wih buitng, equipment and warehouses used in production + Financing charges associated wi xed assets ised inthe producton the amour ot ich were not previously captalzed © ECOZONE DevlpeOpertr, Facies, Utes, Tourism Enterprises: Dirac salaris, wages oto expenses Serve supenisn sles * Direct materials, supplies used '* Depreciation of machineries and equipment used inthe recition of registered services _and that portion ofthe builing owned or constructed tha is used exclusively inte tention of rsd seve ‘© Rent and utlty charges for buildings and capital equipment used inthe renditon of registered serves ‘= Financing charges associated with fined assets used inthe registered business the aroun of wich wre ol prevous capiaized 556 ae VELA wad typ ed) Ylslerd sharing of 5% Gross in, lertri METAR (RR 1247 og J Enterprises shal, ine Mende by developers), pay a tx equ et hes re, 1 tax shall be shared and gighy ae 1 5% b; } di treasurer's office where the nes to the nat ste e special Economic Zone (Ec mterprng. 2" arisditon of more than ene 3h) Sted Imniialty trom tho 23 np) OY 0” fumed scarcer we implement withholding Taxes, PEZA registered companies a for unregistered operations. However eon exempted from being a withholding agent Then 4 compan to be assessed by BIR, if there wil be ature to want ne Wg Withnolding Tax on Wages, Expanded vaste 3 Fina eee part of PEZA registered enterprise, ing Tax tom eal apie onthe Exemption of PEZA Reg. Enterprises Licenses and Foes (PEZA Memorandum eco es Local Taxes, lum Cireular 2004-024) All PEZA registered ecozone local oral 3 fiscal incentives [TTH, 5% GIT ini property property tax owned by developers, andor ox voratnn machinery and equipment, Yow nara pie, sy a eae production inputs}, including Logistic Facies enterprises, at corms, having to secure ail LGU permis, cra tor enterprises, which ich ae ented to any leu of rational and local axes excep) PEZA restored enters, avaling of Tinea ex payment ofa local ates, lenses, mpl an ees xe easoae provided that these enterprises shal ao be scp fom pet property taxes on machnedes and equpment they aa br we n bar production operations during the fet 3 years of ue such nace and equipment PEZA registered enterprises, avaling of the 5% GIT incentve a ‘exempted from payment of all national and local taxes, except real proerty tax ‘owned by developers xed operationslactvites) made by ‘TAX TREATMENT of Sales (from registe ae Jide of the separate customs PEZA registered entorprises into or ous territory (RMC 74-99). . 1. Tax Treatment of Sales Made by a Vat Reg. ‘Supplier from Customs Temitory to stered Enterprise 7 sal 3 aces tax regime, in eu ofl taxes, excep re] POP 567 eenPEZA and BOI Refistered Extey & ses indirect export, hence, consider ) ’ d) 2) a LLLA Upon expiry of the income 1 ‘exemption from all atone, 2% (0 gross revenues deri returns and allowanc deduction is made fo taxable period) “ed BOY Ray Ryistered, (aly Holey - 5 I and local mes fal : imposter Duce se a am ‘2 88 ae eer antago, es Fone Ae 5 ay, re se cores first three (3) years of operation of sna oe & attached oral estate stabs exons a edt Exemption ftom expanded withing nr, I propery ares INFORMATION TECHNOLOGY ENTERPRISE a) » 9 Income Tax Holy (TH) 100k ee * 4years ITH for Non-pioneer pr ea ce + 6 years ITH for Pinger ren cae ae ITH Extension year may be gars ret comps (one rerio equivalent tone TH extension year} one et entitlement period shall not exceed eight (8) years: eee ©The average natin exchange earns ange carigs ott Yeas of pean atest S500 ©The cpa ecupmeno labret te pret os na x to forthe year mmediy preceang tes onasser ee for3 years ifr Exparcon poet eps eoron Project forthe fest tee 3) Upon expiry ofthe Income Tax Hoay- 5% Speci Tax on Gress neon and excemption from al national and local taxes. (Goss nome” rls gure (¢gross revenues derived fromthe egtered act nett sles Saco ses felums and allowances and mieus cost of sales or dr cox ut bere ary deduction is made for administrative expenses or incident loses cng agen taxable period). Tax and duty fee importation of eupment nd pats. Exemption fom wharfage des on mport spent of equpment VAT zero-ating of local purchases of goods and saves, ncn ated telecommuniclions, elec pver, water bls and ase ne bal, uct {8 complane wit Buren nal Revers rd PEZA ge Exemption from payment of any ad allocl goverment renoe Sri are fae h eco ae tax, Dut machines Instaed end operated in the mon ze ‘manufacturing, processing orforindustal purposes shat not be sbjto ayant ‘Of roal estate Laces fr the fist he (3) years of operation of sen marines Production equipment not tached to the ral eta sha be exam roperty taxes. Ercmplon fam expands wr 559 melLocATOR (a= qualified unde sw ECONOMIG ZONE NOTE Hotday TH (85 8 0 Neng 3, TOURIS! qe a) Four (4) years of nee a Fo ores PEM yoiay- 5% S08 TOL OM SSS iam 5) pen vor oe MEBMEpal tanes CEES MCOME EF 0 Gg gal an 50 ah oat) Otro actmy Net sles discs Se, remot eres aries OM Ps Sop fsa Of Ct COS but boy ware a ents onda esses de) Sedtcton mo 98 and ‘or administrative & 2, 9 me Sites mpraion et ae gods and sevices, ies 3) VAT Zero. Rating oe, electric power, and water ils 19 lang. var 2 mar 9 ln fom eer pense sc reigasTOURSMENTERPRE yon cme sy om seni NDIA Tone 6 foi me op ‘of the Income Tax oy peel atonal nde ts ws (Gross Income" refers 10 FOSS Sales or yr bs iy rte ec ee ac sf tl tr Be no feb Soro. vine sw {aa ern i Se ane eet ete ee er rts on, iy (Rt a au | Eee cs tive expenses oF i a 5, AGRO-INDUSTRIAL ECONOMIC ZONE ENTERPRISE ‘2) Four (4) years of Income Tax Holiday ) Fou yeas the Income Tax Holiday - 6% Special tax on Gross Income and 8) Upon xy ° ) Uren ero al rational and lca faxes. (ross Income” refers to gross sles erat ea deve tom terested atv), net of sales discounts, sls md mins cost of sles or dec! costs but before ary retums and allowances ar Geducton is made for administrative expenses or incidental losses during a given taxable period) ) Tax and duty fre importation of production equipment and machineries, breeding stocks, fam implements including spare parts and supplies ofthe equipment and machineries. . Additonal deduction for necessary and major inrastructre wor A registred enters looaing in LDAS oF in areas de, sai st Oe A to ‘eae an amour equine OPENS MCUTES he gy De en, ‘of necessary and major infrastructure works. 7 The fem may aay ompor captalewubment, Par pas and aco, at 1% ty rate fom date of region oF up io June 5, 2006 pues rece ore no 313 ant mpleenting res and reglabong 1 B. Zoro-rated value added tax (0% vat) “The BO endorses tothe BIR to (2) ypes of zero-ated (0%) vat 7 For purchases of raw mati and suppes Used nthe manufac, veh form pat ofthe registere export product. as + For purchases of goods, senfces, oF properties of firms export hundred percent (100%) ofthe produc. (Motor vohicies arena cose xcept specatzed vehces suchas backhoe, fork ete NON-FISCAL INCENTIVES 1. Employment of foreign nationals A registered enterprise may be allowed to ‘employ foreign nationals in supervisory, technical or advisory positions for five (6) years ftom date of registration. The position of president, general manager and treasurer of foreign-owned registered enterprises or their equivalent shal however not be subject to the foregoing limitations 2. Simplification of customs procedures for the importation of equipment, spare parts, raw materials and supplies and exports of processed products. 3. Importation of consigned equipment for 2 period of 10 years from date of registration, subject to posting of a re-export bond. 4. The privilege to operate a bonded manufacturing/trading warehouse subject to ‘customs rules and regulations. INVESTMENT PRIORITIES PLAN (IPP) ‘The Board of Investments (BO!) issues the Investment Priorities Pian (PP) annually which isa list of promoted areas of investments eligible for government incentives. Article 27 provides that, not ater than the end of March of every yea the Board of Investments, after consultation with the appropriate government agencies and the private sector, shall submit to the President an Investment Priorities Plan: Provided, however, That the deadline for submission may be ‘extended by the President (Art. 27) 566 ZA aud BOD Regi No economic avy shal be incudeg ine i ss shown 10 be economzaly,tchncaly ag feet Ponty Pan unesygh investigation and analysis by the Board, male ives ‘re Board shall take ito account the following ‘2. Primarily, the economic soundness of the specif economic intemal rate ofretum PME aE 8 shown by ts The extent of contribution ofan activity to Cc. Other indicators or comparative advantag d, Measured capacity as defined in Article 20: and fe, The market and technical aspects and considera , proposed to be included rations ofthe actvty € specific developmental goal Inany ofthe declared prefered areas of investment, the Board may designate as pioneer areas the spectc products and commoxites that mee! he requrerronts af Atle 17 ofthis Code and review yeary whether such actvty, a deerme oy the Board, shall continue as pioneer, otherwise, it shall be considered ay nor, pioneer and accordingly listed as such in the Investment Priorities Pian or removes ‘fom the Investment Priorities Plan APPROVAL OF THE INVESTMENT PRIORITIES PLAN. ‘The President shall prociaim the whole or part of such plan as in effect: or iteratively, retum the whole or part of the plan to the Board of Investment for revision. Upon the effectivity of the plan or portions thereof, the President shall issue all necessary directives to all departments, bureaus, agencies or Instrumentalities of the government to ensure the implementation ofthe pian by the ‘agencies concerned in a synchronized and integrated manner. No government body shall adopt any policy or take any course of action contrary to or inconsistent withthe plan ‘Amendments to IPP ‘Subject to publication requirements and the criteria for investment priority ‘determination, the Board of Investments may, at any time, add additional areas in the plan, ater any of the terms ofthe decaration of an investment area or the ignation of measured capacities, or terminate the status of preference. Inno 280, however, shall any amendment ofthe plan impair whatever rights may have ‘keady been legally vested in qualified enterprises which shall continue to enjoy ‘Such rights to the full extent allowed under this Code. The Board shall not accept 567PEZA and BOI Reyistered 2 Ester of th applications in an area of investment porto the approval ofthe same as a ‘area nor after approval ofits deletion 2s a preferred area of investment *°"*treq Publication Upon approval of te pln in whol Pat, oF upon a amenament nee te len er he amerent, Speaiying and ae’ fn prof areas of mvesinent an he corespordng measured cape he a a vee a) newspanr of general Croat anf orc abe hall bo open fr applcation unt publication of an amencment or deletion aS Sa fe Boo tpoves regen of enlrses Whey ceneaty 2 REGISTRATION OF ENTERPRISES (Art. 32) ‘Qualifications for Registration under of IPP To be entitled to registration under the Investment Priorities Plan, an applicant ‘must satisfy the Board that: 1. Heisactizen of the Philippines, n case the applicant isa natural person, orn ‘case ofa partnership or any other association itis organized under Philpng iaws and that at least sity percent (60%) ofits capital is owned and contraieg by ctzens of the Philippines; or in case of a corporation or a cooperative, is organized under Philippine laws and that atleast sixty per cent (60%) of the capital stock outstanding and entitled to vote is owned and held by Philippine rationals 2s defined under Article 15 of tis Code, and at least sixty per cent (60%) ofthe members of the Board of Directors are citizens of the Philippines, 2. The applicants proposing to engage ina prefered project listed or authorized in the curent Investment Priories Plan within a reasonable time tobe fied by the Board o, if not so listed, at leas fity percent (50%) ofits total production is for export or itis an existing producer which will export part of producion Under such conditions andlor limited incentives as the Board may determine; or that the enterprise is engaged or proposing o engage inthe sale abroad of (port products bought by it from one or more export producers; or the enterprise is engaged or proposing to engage in rendering technica, professional or other services or in exporting television and mation pictures and musical recordings made or produced in the Philippines, either directly oF through a registered trader. 3. The applicant is capable of operating on a sound and efficient basis of contbutng tothe national development of the prefered area in partulr are of the national economy in general: and 4. Ifthe applicant is engaged or proposes to engage in undertaking of activites ‘other than preferred projects, it has installed or undertakes to install 20 ‘accounting system adequate to identify the investments, revenues, costs: & Profits or losses of each preferred project undertaken by the enterP*s? 568 PEZA and BOI Registered Ex ately from the aggregate investment reve Josses of the whole enterprise or to establish o oy ferred project if the Board should so {plementation ofthis Code, terbrises J NURS, costs and profits oF }parate corporation for each Fequire to facilitate proper pPLICATION Applications shall be filed with the Board, an the date appearing therein and stamped onthe a date of official acceptance, Whenever nece People's Economic Councils, shall consult the Prceplablty of locating the registered enterprise wi ‘recorded in a registration book ‘palcation shall be considered 8sary, the Board, through the Communities affected on the thin their community (Art. 33), APPROVAL AND REGISTRATION PROCEDURES ‘The Board is authorized to adopt rules and regulations to facitate ection ‘on applications filed with it; prescribe crteia for the evaluation of sever! ‘applications fled in one preferred area; devise standard forms forthe use of applicants and delegate to the regional offces of the Deparment of Trade and Industy the authority to receive and process applications for enterprises to be lected in theic respective regions. Appications fled shall be ‘considered auiomatically approved if not acted upon by the Board within twenty (20) working days fom official acceptance thereof (Ar. 34) APPEAL FROM BOARD'S DECISION ‘Any order or decision of the Board shall be final and executor aftr thirty (0) days from its promulgation. Within the said period of thirty (30) days, said order ‘or decision may be appealed to the Office of the President. Where an appeal has been filed, said order or decision shall be final and executory ninety (90) days after the perfection of the appeal, uniess reversed (Art. 36). CERTIFICATE OF REGISTRATION A registered enterprise under this Code shall be issued a certificate of ‘egistation under the seal ofthe Board of Investments and the signature of is Chairman andlor such other ofcer or employee ofthe Board as it may empower and designate for the purpose. The cetficate shall bein such form and style asthe Board may determine and shal state, among other maters: 2. The name of the registered enterprise. b. The preferred area of investment in which the registered enterprise is Proposing o engage. 569)~*~ PEZA and BOI Reistered (ap The nature of the activity it is eee OF proposin, whether pioneer or non-pioneer, and the registered cap, Ind ra enterprise; and aCity Nd |. The other terms and conditions to be observed by the enterprise by virtue of the registration (Art. 37). ot, "se 570