BOIand PEZA Registered Enterprises

Omnibus Investment Code (E0. No. 226)

Declaration of investment Policies
economy in consonance
To accelerate the sound development of the national a
witn tne principles and objectives of economic nationalism and in pursuance of
planned economically feasible and practical dispersal of industries and the
promotion of mall and medium scale industries, under conditions which Wil!
encourage competition and discourage monopolies, the following are deciared
policies of the State:

1) The State shallencourage private Filipinoand foreign investments in industry,

agriculture, forestry, mining,tourism and other sectors of the economy which
shall: provide significant employment opportunities relative to the amount of
the capital being invested; increase productivity of the land, minerals, forestry,
aquatic and other resources of the country, and improve utilization of the
products thereof; improve technical skills of the people employed in the
enterprise; provide a fountain for the future development of the economy;
meet the tests of international competitiveness; accelerate development of
less developed regions of the country; and result in increased volume and
value of exports for the economy.

2) The State shall ensure the holistic development by safeguarding the weli
being of the social, cultural and ecological life of the people. For this purpose,
consultation with affected communities will be conducted whenever
necessary.

3) The State shal extend to projects which will significantly contribute to the
attainment of these objectives, fiscal incentives without which said projects
may not be established in the locales, number and/or pace required for
optimum national economic development. Fiscal incentive system shall be
devised to compensate for market imperfections, to reward performance
contributing to economic development, be cost-efficient and be simple to
administer.

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 BOl and PEZA Registeru Erterriss
A) The State considers the private sector as the prime mover for econorm:
orowth In this regard, private initiative is to be encouraged, with dereguletio
and self-regulation of business activities to be generally adopted where
dictated by urgent social concerns.
5) The State shall principally play a supportive role, rather than a competitive
one providing the framework, the climate and the incentives within which
business activity is to take place.

6) The State recognize that there are appropriate roles for local and foreion
capital to play in the development of the Philippine economy and that it is the
responsibility of Government to define these roles and provide the climate for
their entry and growth.
7) The State recognizes that industrial peace is an essential element of
economic growth and that it is a principal responsibility of the State to ensure
that such condition prevails.

8) Fiscal incentives shall be extended to stimulate the establishment and assist

initial operations of the enterprise, and shall terminate after a period of not
more than 10 years from registration or start-up of operation unless specific
period is otherwise stated.
The foregoing declaration of investment policies shall apply to all investment
incentive schemes.

Composition of the Board of Investments

The Board of Investments shall be composed of seven (7 governors: The
Secretary of Trade and Industry, three (3) Undersecretaries of Trade and Industry
to be chosen by the President, and three (3) representatives from other
government agencies and the private sector. The Secretary of Trade and Industry
shall be concurrently Chairman of the Board and the Undersecretary of the
Department of Trade and Industry for Industry and Investments shall be appointed
by the President for aterm of four (4) years: Provided, That upon the expiration of
his term, a governor shall serve as such until his successor shall have been
appointedand qualified: Provided, further, That no vacancy shall be filled except
for the unexpired portion of any term, and that no one may be designated to be
governor of the Board in an acting capacity but all appointments shall be ad
interim or permanent.
Investment Priorities Plan
"Investment Priorities Plan" shall mean the over-all plan prepared by he
Board which includes and contains:
1) The specific activities and generic categories of economic actvy
wherein investments are to be encouraged and the corresponag
manufactured
products and commodities to be grown, processed or
pursuant thereto for the domestic or export market;
2) Specific public utilities which can qualify for incentives under this Co
and which shall be supported by studies of existing and proSpecuve
the
regional demands for the services of such public utilities in the light of

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 BOl and PEZARyosterl Erterriscs
level and structure of income, production, trade, prices and relevant
economic and technical factors of the regions as well as the existing
facilities to produce such services;

3) Specific activities where the potential for utilization of indigenous no

petroleum based fuels or sources of energy can be best promoted;

4) Such other information, analyzes, data,guidelines or criteria as the Board

may deem appropriate.
Criteria for Investment Priority Determination
No economic activity shall be included in the Investment Priority Plan unless it
is shown to be economically, technically and financially sound after thorough
investigation and analysis by the Board.
The determination of preferred areas of investment to be listed in the
Investment Priorities Plan shall be based on long-run comparative advantage,
taking into account the value of social objectives and
along with market, technical, and financial analyses. employing economic criteria
The Board shalltake into account the following:
1) Primarily, the economic soundness of the specific activity as
economic internal rate of return; shown by its
2) The extent of contribution of an activity to a
3) Other indicators or comparative specific developmental goal;
advantage;
4) Measured capacity as defined in Article 20; and
5) The market and technical aspects and
considerations of the activity
proposed to be included.

Qualifications for a Registered Enterprises

To be entitled to registration under the Investment Priorities Plan, an
applicant
must satisfy the Board that:
1) He is a citizen of the Philippines, in case the applicant is a natural person, or
in case of a partnership or any other association, it is organized under
Philippine laws and that at least sixty percent (60%) of its capital is owned
and controlled by citizens of the Philippines; or in case ofa corporation or a
cooperative, it is organized under Philippine laws and that at least sixty per
cent (60%) of the capital stock outstanding and entitled to vote is owned and
held by Philippine nationals as defined under Article 15 of this Code, and at
least sixty per cent (60%) of the members of the Board of Directors are
citizens of the Philippines. If it does not possess the required degree of
ownership as mentioned above by Philippine nationals, the following
circumstances must be satisfactorily established:
That it proposes to engage in apioneer projects as defined in Article 17
of this Code, which, considering the nature and extent of capital
requirements, processes, technical skills and relative business risks

472
 involved, is in the opinion of the Board of such a nature that the available
measured capacity thereof cannot be readily and adequately filled hy
Philippine nationals: or. if the applicant is exporting at least seventy ner
cent (70%) of its total production, the export requirement herein provided
may be reduced in meritorious cases under such conditions and/or
limited incentives as the Board may determine;

b That it obligates itself to attain the status of a Philippine national. ac

defined in Article 15, within thirty (30) years from the date of registration
or with such longer period as the Board may require taking into aCcOunt
the export potential of the project: Provided, That a registered enterprise
which exports one hundred percent (100%) of its total production need
not comply with this requirement;
C That the pioneer will engage in is one that iS not within the activities
reserved by the Constitution or other laws of the Philippines to the
Philippine citizens or corporations owned and controlled by Philippine
citizens;
2) The applicant is proposing to engage in a preferred project listed or
authorized in the current Investment Priorities Plan within a reasonable time
to be fixed by the Board or, if not so listed, at least fifty percent (50%) of its
total production is for export or it is an existing producer which will export part
of production under such conditions and/or limited incentives as the Board
may determine; or that the enterprise is engaged or proposing to engage in
the sale abroad of export products bought by it from one or more export
producers; or the enterprise in engaged or proposing to engage in rendering
technical, professional or other services or in exporting television and motion
pictures and musical recordings made or produced in the. Philippines, either
directly or through a registered trader.
3) The applicant is capable of operating on a sound and efficient basis of
contributing to the national development of the preferred area in particular
and of the national economy in general; and

4) If the applicant is engaged or proposes to engage in undertakings or activities

other than preferred projects, it has installed or undertakes to install an
accounting system adequate to identify the investments, revenues, costs, and
profits or losses of each preferred project undertaken by the enterprise
separately from the aggregate investment, revenues, costs and profits or
losses of the whole enterprise or to establish a separate corporation for eacn
preferred project if the Board should so require to facilitate proper
implementation of this Code.

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 BOl and PIA Ryoler Enteiss
Certificate of Registration
A registered enterprise under this Code shall be issued a certificate of
registration under the seal of the Board of lnvestments and the signature of its
Chairman and/or such other officer or emplovee of the Board as it may empower
and designate for the purpose. The certificate shall be in such form and style as
the Board may determine and shall state, among other matters:

1) The name of the registered

enterprise;
2) The preferred area of investment in which the registered enterprise is
proposing to engage;
3) The nature of the activity it is undertaking or proposing to undertake,whether
pioneer or non-pioneer, and the registered capacity of the enterprise,
4) The other terms and conditions to be observed by the registered enterprise by
virtue of the registration.

INCENTIVESTO BOIREGISTERED ENTERPRISES

All registered enterprises shall be granted the following incentives to the
extent engaged in apreferred area of investment;
1. Income Tax Holiday. -

a) For six (6)years from commercial operation for pioneer firms and four (4)
years for non-pioneer firms, new registered firms shall be fully exempt
from income taxes levied by the National Government. Subject to such
guidelines as may be prescribed by the Board, the income tax exemption
will be extended for another year in each of the following cases:
i. the project meets the prescribed ratio of capital equipment to number
of workers set by the Board;
ii. utilizationof indigenous raw materials at rates set by the Board;
iii. the net foreign exchange savings or earnings amount to at least
US$500,000.00 annually during the first three (3) years of operation.
The preceding paragraph notwithstanding, no registered pioneer firm may
avail of this incentive for a period exceeding eight (8) years.
registered
b) For a period of three (3) years from commercial operation, taxes
expanding firms shall be entitled to an exemption from income
expansion under
levied by the National Government proportionate to their
determine; Provided,
such terms and eonditions as the Board may incentive is availed of
however, That during the period within which thisadditional deduction for
by the expanding firm it shall not be entitled
to
incremental labor expense.
notwithstanding, registered firms shall not
c) The provision of Article.7 (14)
incentive.
be entitled to any extension of this

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 BOl and PEZA Rgisterl Entertrisas
2. Additional Deduction for Labor Expense. For the first five (5) years
from registration aregistered enterprise shall be allowed an additiona!
deduction from the taxable income of fifty percent (50%) of the wages
corresponding to the increment in the number of direct labor for skiled
and unskilled workers if the project meets the prescribed ratio of capital
equipment to number of workers set by the Board: Provided, That this
additional deduction shall be doubled if the activity is located in less
developed areas as defined in Art. 40.
3 Tax and Duty Exemption on Imported Capital Equipment. Within five
(5)years from the effectivity of this Code, importations of machinery and
equipment and accompanying spare parts of new and expanding
registered enterprise shall be exempt to the extent of one hundred
percent (100%) of the customs duties and national internal revenue tay
payable thereon: Provided, That the importation of machinery and
equipment and accompanying spare parts shallcomply with the following
conditions:
a) They are not manufactured domestically in sufficient quantity, of
comparatble quality and at reasonable prices;
b) They are reasonably needed and will be used exclusively by the
registered enterprise in the manufacture of its products, unless prior
approval of the Board is secured for the part-time utilization of said
equipment in a non-registered activity to maximize usage thereof or
the proportionate taxes and duties are paid on the specific equipment
and machinry being permanently used for non-registered activities;
and
c) The approval of the Board was obtained by the registered enterprise
for the importation of such machinery, equipment and spare parts.
In granting the approval of the importations under this paragraph, the
Board may require international canvassing but if the total cost of the
capital equipment or industrial plant exceeds US$5,000,000, the
Board shall apply or adopt the provisions of Presidential Decree
Numbered 1764 on International Competitive Bidding.
If the registered enterprise sells, transfers or
disposes of these
machinery, equipment and spare parts without prior approval of the
Board within five (5) years from date of
acquisition,
enterprise and the vendee, transferee, or assignee shalltheberegistered
liable to pay twice the amount of the tax solidar1ly
exemption given it.
The Board shall allow and approve the
the said items within the said period of sale, transfer or disposition ol
five (5)
i. to another registered enterprise oryears if made:
producer enjoying similar incentives; registered domeso
for reasons of proven technical
i. for purpOses of replacement toobsolescence;
improve
or
and/or
operations of the registered enterprise. expand ne

475
Tax Credit on Domestic Capital Equipment
of the
A tax credit equivalent to one hundred percent (100%) of the value waived
national internal revenue taxes and customs duties that would have been
on the machinery, equipment and spare parts, had these items been imported
shall be given to the new and expanding registered enterprise which purchases
machinery, equipment and spare parts from a domestic manufacturer: Provided,
That (a) That the said equipment, machinery and spare parts are reasonably
needed and will be used exclusively by the registered enterprise in the
manufacture of its products, unless prior approval of the Board is secured for the
part-time utilization of said equipment in a non-registered activity to maximize
usage thereof; (b) that the equipment would have qualified for tax and duty-free
importation under paragraph (3) hereof; (c) that the approval of the Board was
obtained by the registered enterprise; and (d) that the purchase is made within
five (5) years from the date of effectivity of the Code. If the registered enterprise
sells, transfers or disposes of these machinery, equipment and spare parts, the
provisions inthe precedingparagraph for such disposition shallapply.
1. Exemption from Contractor's Tax. The registered enterprise shall be
exempt from the payment of contractor's tax, whether national or local.
2. Simplification of Customs Procedure. Customs procedures for the
importation of equipment, spare parts, raw materials and supplies, and
exports of processed products by registered enterprises shall be simplified by
the Bureau of Customs.

3 Unrestricted Use of Consigned Equipment.- Provisions of existing laws

notwithstanding, machinery, equipment and spare part consigned to any
registered enterprises shall not be subject to restrictions as toperiod of use of
such machinery, equipment and spare parts Provided, that the appropriate re
export bond is posted unless the importation is otherwise covered under
subsections (3) and (13)of this Article. Provided, further, that such consigned
equipment shall be for the exclusive use of the registered enterprise.
If such equipment is sold, transferred or otherwise disposed of by the
registered enterprise the related provision of Article 39 (c) (3) shall apply.
Outward remittance of foreign exchange covering the proceeds of such sale,
transfer or disposition shall be allowed only upon prior Central Bank approval.
4. Employment of Foreign Nationals. Subject to the provisions of Section 29
of Commonwealth Act Number 613, as amended, a registered enterprise may
employ foreign nationals in supervisory, technical or advisory positions for a
period not exceeding five (5) years from its registration, extendible for limited
periods at the discretion of the Board: Provided, however, That when the
majority of the capital stock of aregistered enterprise is owned by foreign
investors, the position of president, treasurer and general manager or their
equivalents may be retained by foreign nationals beyond the period set forth
herein.

476
 Foreign nationals under employIment contract within the purview of thie
incentive, their spouses and unmarried children under twenty-one (21) years
Commonwealth Act Numbered
of age, who are not excluded by Section 29 of
613, as amended, shall be permitted to enter and reside in the Philippines
nationals.
during the period of employment of such foreign
understudies of foreian
A registered enterprise shall train Filipinos as submit
nationals in administrative, supervisory and technical skills and shall
annual reports on such training to the Board.
Materials. The importation of
5. Exemption on Breeding Stocks and Genetic years from the date of
breeding stocks and genetic materials within ten (10) all
registration or commercial operationof the enterprise shall exempt from
be
genetic materials
taxes and duties: Provided, That such breeding stocks and guality
are (1) not locally available and/or obtainable locally in comparable
activity:
and at reasonable prices; (2) reasonably needed in the registered
and (3)approved by the Board.
6 Tax Credit on Domestic Breeding Stocks and Genetic Materials. - Atax
credit equivalent to one hundred percent (100%) of the value of national
internal revenue taxes and customs duties that would have been waived on
the breeding stocks and genetic materials had these items been imported
shall be given to the registered enterprise which purchases breeding stocks
and generic materials from a domestic producer: Provided, a) That said
breeding stocks and generic materials would have qualified for tax and duty
free importation under the preceding paragraph; b) that the breeding stocks
and genetic materials are reasonably needed in the registered activity; c) that
the approvalof the board has been obtained by the registered enterprise; and
d) that the purchase is made within ten (10) years from date of registration or
commercial operation of the registered enterprise.
7. Tax Credit for Taxes and Duties on Raw Materials. Every registered
enterprise shall enjoy atax credit equivalent to the National Internal Revenue
taxes and Customs duties paid on the supplies, raw materials and semi
manufactured products used in the manufacture, processing or production of
its export products and forming part thereof, exported directly or indirectly by
the registered enterprise: Provided, however, that the taxes on the supplies,
raw materials and semi- manufactured products domestically purchased are
indicated as a separate item in the sales invoice.

8 Nothing herein shall be construed as to preclude the Board from setting a

fixed percentage of export sales as the approximate tax credit for taxes and
duties of raw materials based on an average or standard usage for sun
materials in the industry.
9 Access to Bonded Manufacturing/Trading Warehouse System. Registered
export oriented enterprises shall have access to the utilization of the bonded
warehousing system in all areas required by the project subject to sucn

477
 guidelines as may be issued by the Board upon prior consultation with the
Bureau of Customs.

10. Exemption from Taxes and Duties on Imported Spare Parts. -- Importation or
required supplies and spare parts for consigned equipment or those imported
tax and duty free by a registered enterprise with a bonded manufacturing
warehouse shall be exempt from customs duties and national internal
revenue taxes payable thereon, Provided, However, That at least seventy
percent (70%) of production is exported; Provided, further, that such spare
parts and supplies are not locally available at reasonable prices, sufficient
quantity and comparable quality; Provided, finally, That all such spare parts
and supplies shall be used only in the bonded manufacturing warehouse of
the registered enterprise under such requirements as the Bureau of Customs
may impose.
11. Exemption from Wharfage Dues and any Export Tax, Duty, Impost and Fee.
- The provisions of law to the contrary notwithstanding, exports by a
registered enterprise of its non- traditional export products shall be exempted
of its non-traditional export products. shall be exempted from any wharfage
dues, and any export tax, duty, impost and fee.

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
(5) years from date of [Link] 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 a period of 10 years from date of
registration, subject to posting of are-export bond.
4 The privilege to operate a bonded manufacturing/trading warehouse subject
to customs rules and regulations.

478
PEZA Registered Enterpríses
Declaration of Policies

practical realities
It is the declared policy of the government to translate into namely:
Constitution,
the following State policies and mandate in the 1987 the private sector
1) "The State recognizes the indispensable role of incentives to needed
encourages private enterprise, and provides
investments."(Sec. 20, Art. II)
Filipino labor, domestic
2) The State shall promote the preferential use ofmeasures
materials and locally produced goods, and adopt that help make
them competitive." (Sec. 12, Art. XI)
In pursuance of these policies, the government shall actively encourage.
economic and
promote, induce and aCcelerate asound and balanced industrial,
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 famiy
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 EC0ZONES, are selected areas with
highly developed or which have the potential to be developed into agro-industrial, industrial,
touristrecreational, commercial, banking, investment and financial centers. An ECOZONE may contain
any or allof the following: industrial estates (|Es),export processing zones (EPZs), free trade zones, and
touristrecreational centers. The ECOZONE "shall be managed and operated by the PEZA as a
SEPARATE CUSTOMS TERRITORY. The term "Customs Territory" means "the national territory
of the Philippines outside of the proclaimed boundaries of the ECOZONES except those areas
specifically declared by other laws andlor presidential proclamations to have the status of special
economic zones and/or free ports."

Industrial estate (1E) -refers to a tract of land subdivided and developed according to a comprehensive
plan under a unified continuous management and with provisions for basic infrastructure and utilities, with
or without pre-built standard factory buildings and community facilities for the use of the community of
industries.

Export processing zone (EPZ) a specialized industrial estate located physically and/or administratively
outside customs territory. predominantly oriented to export production. Enterprises located in export
processing Zones are allowed to import capital equipment and raw materials free from duties, taxes and
other import restrictions.

Free trade zone an isolated policed area adjacent to a port of entry (as a seaport) andor airport Winelo
imported goods may be unloaded for immediate transshipment or stored, repacked, sorted, mixed, O
otherwise manipulated without being subject to import duties. However, movement of these imporieu
goods from the free-trade area to a non-free-trade area in the country shallbe subiect to import duties.

Enterprises within the zone are granted preferential tax treatment and immiaration laws are more lenien.

479
 Special economic zones were granted special territory various tax and duty
incentives such as under RA 7227 otherwise known as the "Bases Conversion
and Development Act of 1992" to enhance the benefits to be derived from the
Subic and Clark military reservations. RA 7227 was later amended under RA
g400 tO effectively extend the same benefits enioyed in Subic to the Clark
Freeport Economic Zone (Clark FEZ). Under this law, Clark FEZ is considered a
customs territory separate and distinct from the Philippine Customs territory.
Thus, as 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 Clark FEZ enterprises shall be entitled to the Freeport status of
the 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 to
the fiscal incentives as provided for under Presidential Decree No. 66, the law
creating the Export Processing Zone Authority, or those provided under Book V!
of Executive Order No. 226, otherwise known as the Omnibus Investment Code of
1987.

Furthermore, tax credits for exporters using local materials as inputs shall
enjoy the same benefits provided for in the Export Development Act of 1994.

TAXATION OF PEZA REGISTERED ENTERPRISES

Generally, PEZA registered enterprises are taxable as follows:
INCOME TAX HOLIDAY(ITH)
PEZA registered enterprise shalbe exempt from the payment of income
taxes reckoned from the scheduled start of commercialoperations, as follows:
9 New projects with a pioneer status for six (6) years;
New projects with a non-pioneer status for four (4) years;
) Expansion projects for three (3) years.
PIONEER ENTERPRISE shall mean a registered enterprise
engaged in the manufacture, processing or production, and not merely in the
assembly or packaging of goods, products, commodities or raw materials that have
not been or are not being produced in the Philippines on a commercial scale; or
which uses a design, formula, scheme, method, process or system of production or
transformation of any element, substance or raw materials into another raw material
or finished goods which is new and untried in the Phiippines; or

480
 engaged in the pursuit of agricultural, forestry and mining activities andlor servin
including the industrial aspects of food processing whenever appropriate, pre.
determined by the Board, in consultation with the appropriate Department, to he
feasible and highly essential to the attainment of the national goal in relation t
declared specific national food and agricultural program for self sufficiency and
other social benefits of the project; or
utije
which produces non-conventional fuels or manufactures equipment which
non-conventional sources of energy or uses or converts to coal or other non
conventional fuels or sources of energy in its production, manufacturing or
processing operations. Provided, That the tinal product in any of the foregoing
instances, involves or will involve substantial use and procêssing of domestic raw
materials, whenever available; taking into account the risks and magnitude of
investment: Provided, further, That the foregoing definitions shall not in any wau
limit the rights and incentives granted to less-developed-area enterprises provided
under Title V, Book I, hereof.
Non-pioneer enterprise shall include all registered producer enterprises other than
pioneer enterprises.

5% SPECIAL TAX ON GROSS INCOME

AFTER THE ITH PERIOD, PEZA registered enterprises are subject to
and local.
5% Special Tax on Gross Income and IN LIEUof all taxes, national
sales
except real property tax (RMC 74-99). "Gross Income" refers to gross discounts,
or gross revenues derived from the [Link], net of sales
costs but
sales returns and allowances and minus cost of sales or direct
before any deduction is made for administrative expenses or incidental losses
during a given taxable period)
GROSS INCOME ahall refer to Gross sales/revenues derived from business activity
within the ecozone, net of sales discounts, sales returns and allowances minus cost of
sales or direct costs but before any deduction is made for administrative, marketing,
selling and/or operating expenses or incidental losses during a given taxable period
(RMC 74-99)
PEZA-registered enterprises are required to secure their Certificate of Income
Tax Holiday and Certificate of Incentives, respectively, for attachment to ther
Annual Income Tax Return with the BIR as proof of their entitlement to their tax
incentives.

The tax incentives shall apply to. registered operations of ECOZONE

enterprises during period of registration with PEZA. Any unregistered operations
are subject to the NIRC provisions, thus FWT and CGT will apply. Net Incoie
from Unrelated Activities will be subject to 30% RCIT.

481
Withholding Taxes
PEZA registered companies are exempt from creditable withholding tax,
except for unregistered operations. However, PEZA registered companies are not
exempted from being a withholding agent. There may be deficiency withholding
tax to be assessed by BIR, if there will be failure to withhold (e.g. Fringe Benetit
Tax, Withholding Tax on Wages, Expanded Withholding Tax from local suppliers)
on the part of PEZA registered enterprise.
Sharing of 5% Gross Income Tax (RR 12-97 as amended by RR 1-2000)
Enterprises shall, in lieu of all taxes (except real property tax on land
owned by developers), pay a tax equivalent to 5% based on gross income earned.
Said tax shall be shared and distributed to the national government (3%) and to
the treasurer's office where the registered enterprise is located (2%). In case the
Special Economic Zone (ECOZONE) is situated and encompasses the territorial
jurisdiction of more than one (1) city or municipality, the share of each city or
municipality from the 2% special tax paid by ECOZONE enterprises shall be
determined in accordance with the implementing PEZA regulations on the subject.
Exemption of PEZA Reg. Enterprises from LGU Permits and Local Taxes,
Licenses and Fees (PEZA Memorandum Circular 2004-024)

All PEZA registered ecOZone locator enterprises, which are entitled to

any or all 3 fiscal incentives [ITH, 5% GIT in lieu of national and local taxes except
real property property tax owned by developers, and/or tax and duty-free
importation of machinery and equipment, raw materials, supplies, spare parts and
other production inputs], including Logistics Facilities Enterprises, are exempted
from having to secure all LGU permits.

PEZA registered enterprises, availing of ITH incentive are exempted from

payment of all local taxes, licenses, imposts and fees, except real estate taxes;
provided that these enterprises shall also be exempted from payment of real
property taxes on machineries and equipment they acquire for use in their
production operations during the first 3 years of use of such machinery and
equipment.

PEZA registered enterprises, availing of the 5% GIT incentive are

exempted from payment of all national and local taxes, except real property tax
owned by developers

482
 BOl aud VIARyjistered Ealerisea
TAX TREATMENT of Sales (from registered operationslactivities) made by
PEZAregistered enterprises into or outside of the separate customs
territory (RMC 74-99).
1
Tax Treatment of Sales Made by a Vat Reg. Supplier from Customs Territony
to a PEZA Registered Enterprise
a) If the Buyer is a PEZA registered enterprise which is subject to 5%
special tax regime, in lieu of all taxes, except real property tax:
Sale of Goods - treated as indirect export, hence, considered as
zero rated sale (0% vat) under EO226 (Omnibus Investment Code)
Sale of Service - considered as zero rated sale (0% vat) under "crOse
border doctrine"

b) If the Buyer is a PEZA registered enterprise which is not subject to 5%

special tax regime, hence, subject to taxes under NIRC:
Sale of Goods treated as indirect export, hence, considered as
zero rated sale (0% vat) under EO226 (Omnibus Investment Code)
Sale of Service - considered as zero rated sale (0% vat) under "cross
border doctrine"

2. Tax Treatment of Sales Made by a Vat Exempt Supplier from Customs

Territory to a PEZA Registered Enterprise
Sale of Goods, property and services by a vat exempt supplier from
customs territory to a PEZA registered enterprise is vat exempt regardless of
whether or not the PEZA registered enterprise is subject to taxes under the
NIRCtaxes or enjoying 5% special tax regime or a registered manufacturer
'exporter the "Cross border doctrine" of the vat system to the contrary
notwithstanding.
3. Tax Treatment of Sales Made aPEZA Registered Enterprise
a.
Sale of Goods - Treated as "technical importation". Such buyer shallbe
treated as importer thereof and shall be imposed with the corresponding
import taxes (i.e; vat, excise taxes, as the case may be).
The registered enterprise gross income therefrom shall be subject to 5%
special tax regime. Provided; however, that its sales in the Customs
Territory do not exceed the threshold allowed or permitted for such sales.

FISCAL INCENTIVESto PEZA-Registered Economic Zone Enterprises

1. ECONOMIC ZONE EXPORT MANUFACTURING ENTERPRISE
a) Income Tax Holiday (ITH) 100% exemption from corporate income tax
4 years ITH for Non-pioneer Project
6 years ITH for Pioneer Project
ITH Extension years may be granted if Project complies with the following crterra,
(one criterion is equivalent to one ITH extension year), provided that the total
entitlement period shall not exceed eight (8) years:
The average net foreign exchange earnings of the project for the first tnree
(3) years of operations is at least US$500,000; and

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The capital equipment to labor ratio of the project does not exceed
US$10,000 to 1 for the year immediately preceding the ITH extension year
being applied for.
The average cost of indigenous raw materials used in the manufacture of the
registered product is at least fifty per cent (50%) of the total cost of raw
materials for the preceding years prior to the ITH extension year.
NOTE: 3 years ITH for Expansion project ((TH applies to incremental sales)
b) Upon expiry of the Income Tax Holiday - 5% Special Tax on Gross Income and
exemption from all national and local taxes ("Gross Income" refers to gross sales
or gross revenues derived from the registered activity,net of sales discounts,
sales returns and allowances and minus cost of sales or direct costs but before
any deduction is made for administrative expenses or incidental losses during a
given taxable period)
c) Tax and duty free importation of raw materials, capital equipment, machineries
and spare parts.
d) Exemption from wharfage dues and expot tax, impost or fees
e) VAT zero-rating of local purchases subject to compliance with BIR and PEZA
requirements
Exemption from payment of any and all local government imposts, fees, licenses
or taxes. However, while under Income Tax Holiday, no exemption from real
estate tax, but machineries installed and operated in the economic zone for
manufacturing, processing or for industrial purposes shall be exempt from real
estate taxes for the first three (3) years of operation of such machineries.
Production equipment not attached to real estate shall be exempt from real
property taxes
g) Exemption from expanded withholding tax
2 INFORMATION TECHNOLOGY ENTERPRISE
a) Income Tax Holiday (ITH) 100% exemption from corporate income tax:
4 years ITHfor Non-pioneer project
6 years ITHfor Pioneer project

ITHExtension year may be granted if Project complies with the following criteria
(one criterion is equivalent to one ITH extension year,), provided that the total ITH
entitlement period shall not exceed eight (8)years:
The average net foreign exchange earnings of the project for the first three
(3)years of operations is at least US$500,000; and
The capital equipment to labor ratio of the project does not exceed
US$10,000 to 1 for the year immediately preceding the ITH extension year
being applied for 3 years ITH for Expansion project (|TH applies to
incremental sales)

b) Upon expiry of the Income Tax Holiday - 5% Special Tax on Gross Income and
excemption from all national and local taxes. ("Gross Income" refers to gross
sales or gross revenues derived from the registered activity, net of sales
discounts, sales returns and allowances and minus cost of sales or direct costs
but before any deduction is made for administrative expenses or incidental losses
during a given taxable period).
c) Tax and duty free importation of equipment and parts.
d) Exemption from wharfage dues on import shipments of equipment.
VAT zero-rating of local purchases of goods and services, including land-based
e) telecommunications, electrical power, water bills, and lease on the
buildina, subject to compliance with Bureau of Internal Revenues and PEZA
requirements

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government imposts, fees, licenes.
f) Exemption from payment of any and all local
Tax Holiday, no exemption from rea
or taxes. However, while under Income operated in the economic zone t
estate tax, but machineries installed and purposes shall not be subject to
manufacturing, processing or for industrial
three (3) years of operation of u
payment of real estate taxes for the first attached to the real estate shal h
machineries. Production equipment not
exempt from real property taxes.
g) Exemption from expanded withholding tax.
ENTERPRISE
TOURISM ECONOMIC ZONE LOCATOR
ITH (as qualified under the National
3.
a) Four (4) years of Income Tax
Holiday
Investment Priorities Plan)

b) Upon expiry of the Income Tax Holiday - 5% Special TaX on GrosSs Income and
Income" refers to gross sales
exemption from all national and local taxes ("Gross
registered activity , net of sales discounts
or gross revenues derived from the sales or direct costs but beföre
sales returns and allowances and minus COst of incidental losses during a
any deduction is made for administrative expenses or
given taxable period)
C Tax and duty-free importation of capital equipment
and services, including land
d) VAT Zero Rating on local purchases of goods
based telecommunications, lectric power, and water bills
e) Exemption from expanded withholding tax
4. MEDICAL TOURISM ENTERPRISE
servicing foreign
a) Four (4) years of Income Tax Holiday on income solely from
patients.

b) Upon expiry of the Income Tax Holiday - 5% Special tax on Gross Income upon in
lieu of all national and local taxes. ("Gross Income" refers to gross sales or gross
returns
revenues derived from the registered activity , net of sales discounts, sales
cost of sales or direct costs but before any deduction is
and allowances and minus
made for administrative expenses or incidental losses during a given taxable
period).
Tax and duty-free importation of medical equipment, including spare parts and
c)
equipment supplies, required for the technical viability and operation of the
registered activity/ies of the enterprise.
d) VAT Zero Rating on local purchases of goods and services, including land
based telecommunications, electric power, and water bills
e) Exemption fromexpanded withholding tax
5. AGRO-INDUSTRIAL ECONOMICZONE ENTERPRISE
a Four (4) years of Income Tax Holiday
b) Upon expiry of the Income Tax Holiday - 5% Special tax on Gross Income and
exemption from all national and local taxes ("Gross Income" refers to gross
sales or gross revenues derived from the registered activity , net of sales
discounts, sales returns and allowances and minus cost of sales or direct cost
but before any deduction is made for administrative expenses or incidental losses
during a given taxable period)
c) Tax and duty free importation of production equipment and machineries, breeag
stocks, farm implements including spare parts and supplies of the equipment ad
machineries.
d) Exemption from export taxes,wharfage dues, impost and fees.
e) VAT Zero Rating on local purchases of goods and services, including la
based telecommunications, electric power, and water bills.

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 f) Exemption from payment of local government fees such as Mayors Permit.
Business Permit, permit on the Exercise of profession/Occupation/Calling, Health
Certificate Fee, Sanitary Inspection Fee, and Garbage Fee
6. ECONOMIC ZONE LOGISTICS SERVICES ENTERPRISE
a) Exemption from duties and taxes on raw materials, semi-finished goods for re-sale
to- or for packinglcovering, cutting, altering for subsequent sale to PEZA
registered Export ManufacturingEnterprises, for direct export or for consignment
to PEZA-registered export enterprise.
b) VAT Zero Rating on raw materials for checking, packing, visual inspection,
storage and shipping to be sourced locally
7. ECONOMIC ZONE DEVELOPER/OPERATOR

7.a. Manufacturing Economic Zone Developer / Operator

Special 5% Tax on Gross lncome and exemption from all national and local taxes,
except real property tax on land owned by the Econimic Zone Developer. ("Gross
Income" refers to gross sales or gross revenues derived from the registered activity
net of sales discounts, sales returns and allowances and minus cost of sales or
direct costs but before any deduction is made for admínistrative expenses or
incidental losses during a given taxable period)
VAT Zero rating of local purchases
Exemption from expanded withholding tax
7.b. IT Park Developer /Operator
Special 5% Tax on Gross Income and exemption from all national and local taxes,
except real property tax on land owned by the IT Park Developer. ("Gross Income"
refers to gross sales or gross revenues derived from the registered activity , net of
sales discOunts, sales returns and allowances and minus cost of sales or direct
costs but before any deduction is made for administrative expenses or incidental
losses during a given taxable period)
VAT Zero rating of local purchases
Exemption from expanded withholding tax
7.c. Tourism Economic Zone Developer /Operator
Special 5% Tax on Gross Income and exemption from all national and local taxes,
except real property tax on land owned by the Tourism Economic Zone Developer.
("Gross lncome" refers to gross sales or gross revenues derived from the
registered activity , net of sales discounts, sales returns and allowances and minus
cost of sales or directcosts but before any deduction is made for administrative
expenses or incidental losses during a given taxable period).
VAT Zero rating of local purchases
Exemption from expanded withholding tax

7.d. Medical Tourism Economic Zone Developer /Operator

Special 5% Tax on Gross Income and exemption from all national and local taxes.
except real property tax on land owned by Medical Tourism Zone Developer.
("Gross Income" refers to gross sales or gross revenues derived from the
registered activity , net of sales discounts, sales returns and allowances and minus
cost of sales or direct costs but before any deduction is made for administrative
expenses or incidental losses duringa given taxable period).
VAT Zero rating of local purchases
Exemption from expanded withholding tax

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7.e. Agro-Industrial Economic }one Developer /Operator
Special 5% Tax on Gross Income and exemption from all national and local taxes
except real property tax on land owned by the Agro-Industrial Economic Zone
Developer. ("Gross Income" refers to gross sales or gross revenues derived from
the registered activity , net of sales discounts, sales returns and allowances and
minus cost of sales or direct costs but before anydeduction is made for
administrative expenses or incidental losses during a given taxable period)
VAT Zero rating of local purchases
Exemption from expanded withholding tax
7.f. Retirement Economic Zone Developer / Operator
Special5% Tax on Gross Income and exenption from allnational and local taxes,
except real property tax on land Owned by the Retirement Economic Zone
Developer. ("Gross Income" refers to gross sales or gross revenues derived from
the registered activity , net of sales discounts, sales returns and allowances and
minus cost of sales or direct costs but before any deduction is made for
administrative expenses or incidental losses during a given taxable period)
VAT Zero rating of local purchases
Exemption from expanded withholding tax
8. FACILITIES ENTERPRISES
8.a. Economic Zone Facilities Enterprise
Special 5% Tax on Gross Income and exemption from all national and local taxes,
except realproperty tax on land owned by developers. ("Gross Income" refers to
gross sales or gross rèvenues derived from the registered activity, net of sales
discounts,sales returns and allowances and minus cost of sales or direct costs but
before any deduction is made for administrative expenses or incidental losses
during a given taxable period)
VAT Zero rating of local purchases
Exemption from expanded withholding tax

8.b. IT Park Facilities Enterprise

Special 5% Tax on Gross Income and exemption from all national and local taxes,
except real property tax onland owned by developers. ("Gross Income" refers to
gross sales or gross revenues derived from the registered activity , net of sales
discounts, sales returns and allowances and minus cost of sales or direct costs but
before anydeduction is made for administrative expenses or incidental losses
during a given taxable period)
VAT Zero rating of local purchases
Exeription from expanded withholding tax
8.c. Retirement Economic Zone Facilities Enterprise
Special 5% Tax on Gross Income and exemption from all national and local taxes,
except real property tax on land owned by developers. ("Gross Income" refers to
gross sales or gross revenues derived from the registered activity , net of sales
discounts, sales returns and allowances and minus cost of sales or direct costs but
before any deduction is made for administrative expenses or incidental losses
during a given taxable period)
VAT Zero rating of local purchases
Exemption from expanded withholding tax
9. ECONOMICZONE UTILITIES ENTERPRISE
Special 5% Tax on Gross Income and exemption from all national and local taxes,
except real property tax on land owned by developers. ("Gross Income" refers to
gross sales or gross revenues derived from the registered activity , net of sales

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 alscounts, sales returns and allowances and minus cost of sales or direct costs but
before any deduction is made for administrative expenses or incidental losses
during a given taxable period)
VAT Zero rating of local purchases
Exemption from expanded withholding tax
NON-FISCAL INCENTIVES:
1. Simplified Import-Export Procedures (Electronic Import Permit System and
Automated Export Documentation System).
2. Non-resident foreign nationals may be employed by PEZA-registered Economic
Zone Enterprises in supervisory,technica, or advisory positions.
3. Special Non-Immigrant Visa with Multiple Entry Privileges for the following non
resident foreign nationals in a PEZA-registered Economic Zone Enterprise:
Investorls, Officers, and Employees in supervisory, techical, or advisory
positions, and their spouses and unmarried children under twenty-one years
of age. PEZA extends Visa Facilitation Assistance to foreign nationals and
their spouses and dependents.

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