Several economic zone enterprises registered under the Philippine Economic Zone Authority (PEZA) have contacted PEZA to find out whether they are exempted from obtaining LGU permits and required to pay fees, licenses, local taxes, etc.
To address the current inquiries, PEZA issued Memorandum Circular 2004-024 in order to inform all economic zone stakeholders. Included in the Memorandum Circular are the following:
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- All economic zone located enterprises registered under PEZA are entitled to any or all three fiscal incentives (option to pay special 5% tax on gross income, income tax holiday incentive, 5% GIT incentive, and/or tax and duty-free importation of equipment and machinery, supplies, raw materials, spare parts and other production inputs), including Logistics Facilities Enterprises, are exempted from requiring to secure all LGU permits.
Legal Basis: Republic Act No. 7916
Section 7, which provides that the “ECOZONE shall administer itself on economic, financial, industrial, tourism development and such other matters within the exclusive competence of the national government.”
Section 13. General Powers and Functions of the Authority. (a) “To operate, administer, manage and develop the ECOZONE” and (b) “To register, regulate and supervise the enterprises in the ECOZONE in an efficient and decentralized manner.”
- Economic zone enterprises registered under PEZA availing of the Income Tax holiday incentive are exempted from paying all local taxes, imposts, fees, and licenses, except real estate taxes; provided that they are also exempted from paying real property taxes on equipment and machineries they obtain to use for their production operations in the first three years of use of such equipment and machinery.
- All economic zone located enterprises registered under PEZA are entitled to any or all three fiscal incentives (option to pay special 5% tax on gross income, income tax holiday incentive, 5% GIT incentive, and/or tax and duty-free importation of equipment and machinery, supplies, raw materials, spare parts and other production inputs), including Logistics Facilities Enterprises, are exempted from requiring to secure all LGU permits.
Legal Basis: Republic Act No. 7916
Section 23. “Fiscal Incentives. – 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 VI of Executive Order No. 226, otherwise known as the Omnibus Investment Code of 1987.”
- PEZA-registered economic zone enterprises which avail of the 5% GIT incentive are exempted from paying all local and national taxes, except real property tax on land owned by developers.
Legal Basis: Republic Act No. 7916
Section 24. Exemption from national and local taxes – Except for real property taxes on land owned by developers, no taxes, local and national, shall be imposed on business establishments operating within the ECOZONE. In lieu thereof, five percent (5%) of the gross income earned by all business enterprises within the ECOZONE shall be paid and remitted as follows:
- Three percent (3%) to the National Government; Two percent (2%) which shall be directly remitted by the business establishments to the treasurer’s office of the municipality or city where the enterprise is located.BIR Revenue Regulations No. 12-97. Local taxes are defined under “Regulations Implementing Section 24 of RA 7916”:
- “Local Taxes” – shall refer to all local taxes, business taxes, real estate taxes, and other taxes, fees, and charges imposed by local government units pursuan to the Local Government Code of 1991, as amended.
PEZA will issue a Certificate of Incentives upon the request of PEZA-registered enterprises.
To learn more about exemptions for PEZA-registered economic zone enterprises, get in touch with the attorneys at Duran & Duran-Schulze. Call (+632) 478 5826 or email info@duranschulze.com today.