06/09/2020

Preferential Taxation and other

Special Laws
EXPANDED SENIOR CITIZEN’S
ACT OF 2010 (R.A. 7432, AS
Business Tax under the Accountancy Department of
Ateneo de Zamboanga University AMENDED BY R.A. 9994)

K. J. Culajara, CPA, JD K. J. Culajara, CPA, JD

WHO IS A SENIOR CITIZEN? PRIVILEGES FOR THE SENIOR CITIZENS

Senior citizen or elderly refers to any resident citizen of the Philippines at
least sixty (60) years old.
• 20% discount and exemption from VAT on the following sale (for the
exclusive use and enjoyment or availment of the senior citizen):
on the purchase of medicines, including the purchase of influenza and
pnuemococcal vaccines, and such other essential medical supplies,
accessories and equipment to be determined by the Department of Health
(DOH).
on the professional fees of attending physician/s in all private hospitals,
medical facilities, outpatient clinics and home health care services;

K. J. Culajara, CPA, JD K. J. Culajara, CPA, JD

PRIVILEGES FOR THE SENIOR CITIZENS PRIVILEGES FOR THE SENIOR CITIZENS

on the professional fees of licensed professional health providing home
health care services as endorsed by private hospitals or employed through
home health care employment agencies;
on medical and dental services, diagnostic and laboratory fees in all
private hospitals, medical facilities, outpatient clinics, and home health
care services, in accordance with the rules and regulations to be issued by
the DOH, in coordination with the Philippine Health Insurance Corporation
(PhilHealth);
in actual fare for land transportation travel in public utility buses (PUBs),
public utility jeepneys (PUJs), taxis, Asian utility vehicles (AUVs), shuttle
services and public railways, including Light Rail Transit (LRT), Mass Rail
Transit (MRT), and Philippine National Railways (PNR);
in actual transportation fare for domestic air transport services and sea
shipping vessels and the like, based on the actual fare and advanced
booking;

K. J. Culajara, CPA, JD K. J. Culajara, CPA, JD

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PRIVILEGES FOR THE SENIOR CITIZENS
on the utilization of services in hotels and similar lodging establishments,
restaurants and recreation centers;
on admission fees charged by theaters, cinema houses and concert halls,
circuses, leisure and amusement; and
on funeral and burial services for the death of senior citizens;
K. J. Culajara, CPA, JD
REQUISITES TO AVAIL PRIVILEGES
In the availment of the privileges mentioned above, the senior citizen, or
his/her duly authorized representative, may submit as proof of his/her
entitled thereto any of the following:
• an identification card issued by the Office of the Senior Citizen Affairs
(OSCA) of the place where the senior citizen resides: Provided, That the
identification card issued by the particular OSCA shall be honored
nationwide;
• the passport of the senior citizen concerned; and
K. J. Culajara, CPA, JD
TAX INCENTIVES FOR QUALIFIED
ESTABLISHMENTS
The establishment may claim the discounts granted under subsections (a)
and (c) of this section as tax deduction based on the cost of the goods sold
or services rendered: Provided, That the cost of the discount shall be
allowed as deduction from gross income for the same taxable year that the
discount is granted: Provided, further, That the total amount of the claimed
tax deduction net of VAT, if applicable, shall be included in their gross
sales receipts for tax purposes and shall be subject to proper
documentation and to the provisions of the National Internal Revenue
Code (NICR), as amended.
K. J. Culajara, CPA, JD
06/09/2020
PRIVILEGES FOR THE SENIOR CITIZENS
• exemption from the payment of individual income taxes of senior
citizens who are considered to be minimum wage earners in
accordance with Republic Act No. 9504.
K. J. Culajara, CPA, JD
REQUISITES TO AVAIL PRIVILEGES
• other documents that establish that the senior citizen is a citizen of the
Republic and is at least sixty (60) years of age as further provided in the
implementing rules and regulations.
• In the purchase of goods and services which are on promotional discount,
the senior citizen can avail of the promotional discount or the discount
provided herein, whichever is higher.
K. J. Culajara, CPA, JD
TAX INCENTIVES FOR QUALIFIED
ESTABLISHMENTS
Private entities that will employ senior citizens as employees, upon the
effectivity of this Act, shall be entitled to an additional deduction from their
gross income, equivalent to fifteen percent (15%) of the total amount paid
as salaries and wages to senior citizens, subject to the provision of Section
34 of the NIRC, as amended: Provided, however, That such employment
shall continue for a period of at least six (6) months: Provided, further, That
the annual income of the senior citizen does not exceed the latest poverty
threshold as determined by the National Statistical Coordination Board
(NSCB) of the National Economic and Development Authority (NEDA) for
that year.
K. J. Culajara, CPA, JD
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 06/09/2020

TAX INCENTIVES FOR QUALIFIED

ESTABLISHMENTS
The government shall provide incentives to individuals or
nongovernmental institution caring for or establishing homes,
residential communities or retirement villages solely for, senior
MAGNA CARTA FOR DISABLED
citizens, as follows: PERSONS (R.A. 7277, AS AMENDED
• realty tax holiday for the first five (5) years starting from the first BY R.A. 9442, AND FURTHER
year of operation; and AMENDED BY R.A. 10754)
• priority in the construction or maintenance of provincial or
municipal roads leading to the aforesaid home, residential
community or retirement village.

K. J. Culajara, CPA, JD K. J. Culajara, CPA, JD

RIGHTS AND PRIVILEGES OF

WHO ARE DISABLED PERSONS?
Disabled Persons are those suffering from restriction of different abilities, as
a result of a mental, physical or sensory impairment, to perform an activity in
the manner or within the range considered normal for a human being.
DISABLED PERSONS
• Equal Opportunity for Employment. Note: Five percent
(5%) of all casual, emergency and contractual positions
in the Department of Social Welfare and Development;
Health; Education, Culture and Sports; and other
government agencies, offices or corporations engaged
in social development shall be reserved for disabled
persons.

K. J. Culajara, CPA, JD K. J. Culajara, CPA, JD

RIGHTS AND PRIVILEGES OF ADDITIONAL PRIVILEGES UNDER

DISABLED PERSONS
• Sheltered Employment – In the placement of disabled persons in sheltered
employment, it shall accord due regard to the individual qualities,
vocational goals and inclinations to ensure a good working atmosphere
and efficient production.
• Apprenticeship – Subject to the provision of the Labor Code as amended,
disabled persons shall be eligible as apprentices or learners; Provided,
That their handicap is not much as to effectively impede the performance
of job operations in the particular occupation for which they are hired;
Provided, further, That after the lapse of the period of apprenticeship if
found satisfactory in the job performance, they shall be eligible for
employment.
R.A. 9442
• At least twenty percent (20%) discount and exemption from the value-
added tax (VAT), if applicable, on the following sale of goods and
services for the exclusive use and enjoyment or availment of the
PWD:
On the fees and charges relative to the utilization of all services in hotels
and similar lodging establishments; restaurants and recreation centers;
On admission fees charged by theaters, cinema houses, concert halls,
circuses, carnivals and other similar places of culture, leisure and
amusement;

K. J. Culajara, CPA, JD K. J. Culajara, CPA, JD

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ADDITIONAL PRIVILEGES UNDER
R.A. 9442
On the purchase of medicines in all drugstores;
On medical and dental services including diagnostic and laboratory fees
such as, but not limited to, x-rays, computerized tomography scans and
blood tests, and professional fees of attending doctors in all government
facilities, subject to the guidelines to be issued by the Department of
Health (DOH), in coordination with the Philippine Health Insurance
Corporation (PhilHealth);
K. J. Culajara, CPA, JD
ADDITIONAL PRIVILEGES UNDER
R.A. 9442
On fare for domestic air and sea travel;
On funeral and burial services for the death of the PWD: Provided, That
the beneficiary or any person who shall shoulder the funeral and burial
expenses of the deceased PWD shall claim the discount under this rule for
the deceased PWD upon presentation of the death certificate. Such
expenses shall cover the purchase of casket or urn, embalming, hospital
morgue, transport of the body to intended burial site in the place of origin,
but shall exclude obituary publication and the cost of the memorial lot.
K. J. Culajara, CPA, JD
INCENTIVES FOR ESTABLISHMENTS
• The establishments may claim the discounts granted as tax deductions
based on the net cost of the goods sold or services rendered: Provided,
however, That the cost of the discount shall be allowed as deduction from
the gross income for the same taxable year that the discount is granted:
Provided, further, That the total amount of the claimed tax deduction net of
VAT, if applicable, shall be included in their gross sales receipts for tax
purposes and shall be subject to proper documentation and to the
provisions of the NIRC.
K. J. Culajara, CPA, JD
06/09/2020
ADDITIONAL PRIVILEGES UNDER
R.A. 9442
On fare for domestic air and sea travel;
On actual fare for land transportation travel such as, but not limited to,
public utility buses or jeepneys (PUBs/PUJs), taxis, asian utility vehicles
(AUVs), shuttle services and public railways, including light Rail Transit
(LRT), Metro Rail Transit (MRT) and Philippine National Railways (PNR);
and
K. J. Culajara, CPA, JD
HOW ARE PRIVILEGES AVAILED?
The abovementioned privileges are available only to PWD who are Filipino
citizens upon submission of any of the following as proof of his/her
entitlement thereto:
• An identification card issued by the city or municipal mayor or the
barangay captain of the place where the PWD resides;
• The passport of the PWD concerned; or
• Transportation discount fare Identification Card (ID) issued by the National
Council for the Welfare of Disabled Persons (NCWDP).
• The privileges may not be claimed if the PWD claims a higher discount as
may be granted by the commercial establishment and/or under other
existing laws or in combination with other discount program/s.
K. J. Culajara, CPA, JD
INCENTIVES FOR EMPLOYER
• Private entities that employ disabled persons who meet the required skills
or qualifications, either as regular employee, apprentice or learner, shall be
entitled to an additional deduction, from their gross income, equivalent to
twenty-five percent (25%) of the total amount paid as salaries and wages
to disabled persons: Provided, however, That such entities present proof
as certified by the Department of Labor and Employment that disabled
person are under their employ. Provided, further, That the disabled
employee is accredited with the Department of Labor and Employment
and the Department of Health as to his disability, skills and qualifications.
K. J. Culajara, CPA, JD
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INCENTIVES FOR EMPLOYER
• Private entities that improved or modify their physical facilities in order to
provide reasonable accommodation for disabled persons shall also be
entitled to an additional deduction from their net taxable income,
equivalent to fifty percent (50%) of the direct costs of the improvements or
modifications. This section, however, does not apply to improvements or
modifications of facilities required under Batas Pambansa Bilang 344.
K. J. Culajara, CPA, JD
TAX INCENTIVES
• Donations from foreign countries shall be exempt from taxes and duties on
importation subject to the provisions of Section 105 of the Tariff and
Customs Code of the Philippines, as amended, Section 103 of the NIRC,
as amended and other relevant laws and international agreements.
K. J. Culajara, CPA, JD
TAX INCENTIVES
• freedom from expropriations;
• freedom from requisition of investment;
• income tax holiday;
• additional deduction for labor expense;
• tax and duty exemption on imported capital equipment;
• tax credit on domestic capital equipment;
K. J. Culajara, CPA, JD
06/09/2020
TAX INCENTIVES
• Any donation, bequest, subsidy or financial aid which may be made to
government agencies engaged in the rehabilitation of disabled persons
and organizations of disabled persons shall be exempt form the donor’s
tax subject to the provisions of Section 94 of the National Internal Revenue
Code (NIRC), as amended and shall be allowed as deduction from the
donor’s gross income for purposes of computing the taxable income
subject to the provisions of Section 29 (h) of the Code.
K. J. Culajara, CPA, JD
TAX INCENTIVES
Local manufacturing of technical aids and appliances used by disabled
persons shall be considered as a preferred area of investment subject to the
provisions of Executive Order No. 226 otherwise known as the Omnibus
Investments Code of 1987’•and, as such, shall enjoy the rights, privileges
and incentives as provided in said Code such as, but not limited, to the
following:
• repatriation of investments;
• remittance of earnings;
• remittance of payments on foreign contracts;
K. J. Culajara, CPA, JD
TAX INCENTIVES
• exemption from contractor’s tax;
• simplification of customs procedures;
• unrestricted use of consigned equipment;
• employment of foreign nationals;
• tax credits for taxes and duties on raw materials;
• access to bonded manufacturing/trading warehouse system;
K. J. Culajara, CPA, JD
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TAX INCENTIVES
• exemption from taxes and duties on imported spare parts; and
• exemption from wharfage dues and any export tax, duty, impost and fee.
K. J. Culajara, CPA, JD
INCENTIVES UNDER R.A. 9442
Individuals or nongovernmental institutions establishing homes, residential
communities or retirement villages solely to suit the needs and
requirements of persons with disability shall be accorded the following:
Realty tax holiday for the first five years of operation; and
Priority in the building and/or maintenance of provincial or municipal roads
leading to the aforesaid home, residential community or retirement village.”
K. J. Culajara, CPA, JD
REGISTRATION OF BMBEs
• The Office of the Treasurer of each city or municipality shall register the
BMBE's and issue a Certificate of Authority to enable the BMBE to avail of
the benefits under this Act. Any such applications shall be processed
within fifteen (15) working days upon submission of complete documents.
Otherwise, the BMBEs shall be deemed registered.
• The Municipal or City Mayor may appoint a BMBE Registration Officer who
shall be under the Office of the Treasurer. Local government units (LGU's)
are encouraged to establish a One-Stop-business Registration Center to
handle the efficient registration and processing of permits/licenses of
BMBEs. Likewise, LGUs shall make a periodic evaluation of the BMBE's
financial status for monitoring and reporting purposes.
K. J. Culajara, CPA, JD
06/09/2020
INCENTIVES UNDER R.A. 9442
• Those caring for and living with a person with disability shall be
granted the following incentives:
PWD, who are within the fourth civil degree of consanguinity or affinity to
the taxpayer, regardless of age, who are not gainfully employed and
chiefly dependent upon the taxpayer, shall be treated as dependents
under Section 35(b) of the NIRC of 1997, as amended, and as such,
individual taxpayers caring for them shall be accorded the privileges
granted by the Code insofar as having dependents under the same section
are concerned; and
K. J. Culajara, CPA, JD
BARANGAY MICRO BUSINESS
ENTERPRISES ACT
(R.A. NO. 9178)
K. J. Culajara, CPA, JD
REGISTRATION OF BMBEs
• The LGUs shall issue the Certificate of Authority promptly and free of
charge. However, to defray the administrative costs of registering and
monitoring the BMBEs, the LGUs may charge a fee renewal.
• The Certificate of Authority shall be effective for a period of two (2) years,
renewable for a period of two (2) years for every renewal.
• Who are Eligible to Register – Any person, natural or juridical, or
cooperative, or association, having the qualifications as defined in Section
3(a) hereof may apply for registration as BMBE.
• Transfer of Ownership – The BMBE shall report to the city or municipality
of any changer in the status of its ownership structure, and shall surrender
the original copy of the BMBE Certificate of Authority for notation of the
transfer.
K. J. Culajara, CPA, JD
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INCENTIVES AND BENEFITS

• All BMBEs shall be exempt from tax for income arising from the operations of the
enterprise.
• The BMBEs shall be exempt from the coverage of the Minimum Wage
Law: Provided, That all employees covered under this Act shall be entitled to the
same benefits given to any regular employee such as social security and healthcare SPECIAL ECONOMIC ZONE ACT
benefits.
• Credit Delivery
OF 1995 (R.A. NO. 7916, AS
• Technology Transfer, Production and Management Training, and Marketing AMENDED BY R.A. 8748)
Assistance
• Trade and Investment Promotions – The data gathered from business registration
shall be made accessible to and shall be utilized by private sector organizations and
non-government organizations for purposes of business matching, trade and
investment promotion.

K. J. Culajara, CPA, JD K. J. Culajara, CPA, JD

WHAT ARE SPECIAL ECONOMIC REGISTRATION OF ECONZONE

ZONES?
• These are areas in which the business and trade laws are different from
the rest of the country. They are located within a country’s national
borders, and their aims include increased trade balance, employment,
increased investment, job creation, and effective administration.
• To encourage businesses to set up in the zone, financial policies are
introduced that range from investing, taxation, trading, quotas, customs
and labour regulations. Additionally, companies may be offered tax
holidays, where upon establishment in the zone, they are granted a period
of lower taxation.
ENTERPRISE
Qualification of Applicants
any person, firm, association, partnership, corporation, or any other form of
business organization, regardless of nationality, control and / or ownership
of the working capital thereof may apply for registration as an Export or Free
Trade Enterprise within the ECOZONE in any sector of industry,
international trade and commerce, except duty-free retailing and wholesale
trading of imported finished products for purposes of serving the domestic
market.

K. J. Culajara, CPA, JD K. J. Culajara, CPA, JD

REGISTRATION OF ECONZONE REGISTRATION OF ECONZONE

ENTERPRISE
Furthermore, if the area of investments of the said enterprises falls within
Lists A and B of the Foreign Investments Act of 1991, then the applicable
nationality, ownership or control requirements of the said law shall be
observed.
ENTERPRISE
However, applicants for Domestic Enterprise shall be limited to new or
expanding business entities subject to the guidelines that shall be
promulgated by the Board in addition to the nationality requirements under
existing laws and regulations.

Applications for ECOZONE Developer / Operator, Domestic Market, Utilities,

Facilities, Tourism or Service Enterprises shall comply with the applicable
nationality, control and / or ownership requirements of the working capital
thereof in accordance with the pertinent provisions of the Philippine
Constitution, Foreign Investments Act of 1991 and other existing laws and
regulations.

K. J. Culajara, CPA, JD K. J. Culajara, CPA, JD

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FISCAL INCENTIVES TO PEZA-
REGISTERED ENTERPRISES UNDER P.D.
NO. 66
Except as otherwise provided in this Decree, foreign and domestic
merchandise, raw materials, supplies, articles, equipment, machineries,
spare parts and wares of every description, except those prohibited by law,
brought into the Zone to be sold, stored, broken up, repacked, assembled,
installed, sorted, cleaned, graded, or otherwise processed, manipulated,
manufactured, mixed with foreign or domestic merchandise or used
whether directly or indirectly in such activity, shall not be subject to
Customs and internal revenue laws and regulations nor to local tax
ordinances, the provisions of law to the contrary notwithstanding.
K. J. Culajara, CPA, JD
FISCAL INCENTIVES TO PEZA-
REGISTERED ENTERPRISES UNDER P.D.
NO. 66
• Merchandise sent from the zone to the customs territory shall, whether or
not combined with or made part of other articles while in the zone, be
subject to laws and regulations governing imported merchandise.
The duties and taxes shall be assessed on the value of imported materials
(except when the final product is exempt) and the internal revenue taxes
on the value added.
K. J. Culajara, CPA, JD
FISCAL INCENTIVES TO PEZA-
REGISTERED ENTERPRISES UNDER P.D.
NO. 66
• Subject to such regulations respecting identity and the safeguarding of the
revenue as the Authority may deem necessary when the identity of an
article entered into the zone has been lost, such article when removed
from the zone and taken to the customs territory shall be treated as foreign
merchandise entering the country for the first time, under the provisions of
the Tariff and Customs Code.
• Articles produced or manufactured in the zone and exported therefrom
shall, on subsequent importation into the customs territory, be subject to
the import laws applicable to like articles manufactured in a foreign
country.
K. J. Culajara, CPA, JD
06/09/2020
FISCAL INCENTIVES TO PEZA-
REGISTERED ENTERPRISES UNDER P.D.
NO. 66
• Merchandise purchased by a registered zone enterprise from the customs
territory, if paid for in the United States dollar or in any convertible foreign
currency and subsequently brought into the zone, shall be considered as
exported, and the exporter thereof shall be entitled to the benefits allowed
by law for such transaction.
• Domestic merchandise sent from the zone to the customs territory shall,
whether or not combined with or made part of other articles likewise the
growth, product or manufacture of the Philippines while in the zone, be
subject to internal revenue laws of the Philippines as domestic goods
sold, transferred or disposed of for local consumption.
K. J. Culajara, CPA, JD
FISCAL INCENTIVES TO PEZA-
REGISTERED ENTERPRISES UNDER P.D.
NO. 66
• Domestic merchandise on which all internal revenue taxes have been
paid, if subject thereto, and foreign merchandise previously imported on
which duty or tax has been paid, or which have been admitted free of duty
and tax, may be taken into the zone from the customs territory of the
Philippines and be brought back thereto free of quotas, duty or tax.
• Domestic merchandise sent from the zone to the customs territory shall,
whether or not combined with or made part of other articles likewise of
local origin or manufactured in the Philippines while in the export
processing zone, be subject to internal revenue laws of the Philippines as
domestic goods sold, transferred or disposed of for local consumption.
K. J. Culajara, CPA, JD
FISCAL INCENTIVES TO PEZA-
REGISTERED ENTERPRISES UNDER P.D.
NO. 66
• Unless the contrary is shown, merchandise taken out of the zone shall be
considered for tax purposes to have been sent to customs territory.
• A net-operating loss incurred in any of the first five years of
operation inside the zone may be carried over as a deduction from
taxable income derived in such zone during the five years
immediately following the year of such loss. The entire amount of the
loss and any portion of such loss which exceeds the taxable income of
such first year shall be deducted in like manner from the taxable income of
the next remaining four years.
K. J. Culajara, CPA, JD
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FISCAL INCENTIVES TO PEZA-
REGISTERED ENTERPRISES UNDER P.D.
NO. 66 AND E.O. 226
• Accelerated Depreciation. Fixed assets may be (1) depreciated to the
extent of not more than twice the normal rate of depreciation or
depreciated at the normal rate of depreciation if the expected life is ten
years or less; or (2) depreciated over any number of years between five
years and expected life if the latter is more than ten years; and the
depreciation thereon allowed as a deduction from taxable income:
Provided, That the taxpayer notifies the Bureau of Internal Revenue at the
beginning of the depreciation period which depreciation rate allowed by
this subsection will be used by it.
K. J. Culajara, CPA, JD
FISCAL INCENTIVES TO PEZA-
REGISTERED ENTERPRISES UNDER P.D.
NO. 66
• Financial Assistance. Notwithstanding any provisions of law to the
contrary, zone registered enterprises shall be entitled to at least the same
privileges accorded to enterprises approved by and registered with the
Board of Investments: Provided, That the proceeds derived from or
through such financial assistance shall be used in undertaking projects
approved by the Authority: Provided, further, That in order to facilitate the
payment of the foreign loans, credits and indebtedness contracted by zone
registered enterprises for such projects approved by the Authority, the
Central Bank shall, under such rules and regulations as it may promulgate
upon recommendation of the Authority, allow the deduction of such portion
of the foreign exchange earnings of said enterprises sufficient to meet the
foreign exchange requirements for servicing foreign indebtedness incurred
by them.
K. J. Culajara, CPA, JD
FISCAL INCENTIVES TO PEZA-
REGISTERED ENTERPRISES UNDER P.D.
NO. 66
• Production equipment or machineries, not attached to real estate, used
directly or indirectly, in the production, assembly or manufacture of the
registered product of the zone registered enterprise shall be exempt from
real property taxes.
K. J. Culajara, CPA, JD
06/09/2020
FISCAL INCENTIVES TO PEZA-
REGISTERED ENTERPRISES UNDER P.D.
NO. 66
• Exemption from Export Tax. The provisions of law to the contrary
notwithstanding, foreign merchandise transhipped through the zone or any
article which has been processed, manufactured or manipulated in said
zone and exported therefrom, shall be exempt from any export tax,
imposts or fee, including the stabilization tax imposed by Republic Act
Numbered Sixty-one hundred twenty-five.
• Foreign Exchange Assistance. The Central Bank of the Philippines or any
of its authorized agent banks shall extend to zone registered enterprises,
priority in the allocation of foreign exchange and in the availment of the
assistance and resources of the Central Bank in a manner that would
encourage and accelerate investment in the zone.
K. J. Culajara, CPA, JD
FISCAL INCENTIVES TO PEZA-
REGISTERED ENTERPRISES UNDER P.D.
NO. 66
• Exemption from Local Taxes and Licenses. Notwithstanding the provisions
of law to the contrary, any business enterprise engaged in the production,
processing, packaging, or manipulation of export products shall, to the
extent of their construction, operation or production inside the zone, be
exempt from the payment of any and all local government imposts, fees,
licenses or taxes, except real estate taxes imposed under Commonwealth
Act Numbered Four Hundred seventy and Republic Act Numbered Fifty-
four hundred forty-seven: Provided, That said business enterprise shall
pay in the municipality where the zone is located real estate taxes on all its
real properties located therein.
K. J. Culajara, CPA, JD
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.” (As further amended by R.A. No. 8748)
K. J. Culajara, CPA, JD
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BASES CONVERSION AND
DEVELOPMENT ACT (R.A. NO.
7227, AS AMENDED BY R.A.
9400)
K. J. Culajara, CPA, JD
SSEZ, CFZ, AND PPFZ
• The Subic Special Economic Zone (SSEZ), Clark Freeport Zone (CFZ),
Poro Point Freeport Zone (PPFZ) shall be operated and managed as a
separate customs territory ensuring free flow or movement of goods and
capital within, into and exported out of the Subic Special Economic Zone,
as well as provide incentives such as tax and duty-free importations of raw
materials, capital and equipment.
• However, exportation or removal of gods from the territory of the SSEZ to
the other parts of the Philippine territory shall be subject to customs duties
and taxes under the Customs and Tariff Code and other relevant tax laws
of the Philippines.
• No national and local taxes shall be imposed within the SSEZ.
K. J. Culajara, CPA, JD
MORONG SPECIAL ECONOMIC ZONE (MSEZ)
• Duly registered business enterprises operating within the MSEZ created
under Proclamation No. 984, series of 1997, shall be entitled to tax and
duty-free importation of raw materials and capital equipment.
• In lieu of all national and local taxes except real property tax on land, a five
percent (5%) tax on gross income earned shall be paid by all registered
business enterprises which shall be directly remitted as follows: three
percent (3%) to the National Government, and two percent (2%) to the
treasurer's office of the municipality or city where they are located.
K. J. Culajara, CPA, JD
06/09/2020
DECLARATION OF POLICIES
• It is the policy of the Government to accelerate the sound and balanced
conversion into alternative productive uses of the Clark and Subic military
reservations and their extensions (i.e., John Hay Station, Wallace Air
Station, O’Donnell Transmitter Station, San Miguel Naval Communications
Station, and Caplas Relay Station) to raise funds by the sale of portions of
Metro Manila military camps, and to apply said funds as provided herein
for the development and conversion to productive civilian use of the lands
covered under the 1947 Military Bases Agreement between the Philippines
and the USA.
• It is the declared policy of the government to enhance the benefits to be
derived from said properties in order to promote the economic and social
development of Central Luzon in particular and the country in general.
K. J. Culajara, CPA, JD
SSEZ, CFZ, AND PPFZ
• In lieu of the said taxes, 5% gross income tax (GIT) earned shall be paid
by all business enterprises within the SSEZ, CFZ, PPFZ and shall be
remitted as follows:
Three percent (3%) to the National Government
Two percent (2%) to the
o Subic Bay Metropolitan Authority – in case of SSEZ
o Treasurer’s office of the municipality or city where they are located
– in case of CFZ and PPFZ.
K. J. Culajara, CPA, JD
JOHN HAY SPECIAL ECONOMIC ZONE
(JHSEZ)
• Registered business enterprises which will operate after the effectivity of
this Act, within the JHSEZ created under Proclamation No. 420, series of
1994, shall be entitled to the same tax and duty incentives as provided for
under Republic Act No. 7916, as amended: Provided, That for the purpose
of administering these incentives, the PEZA shall register, regulate, and
supervise all registered enterprises within the JHSEZ: Provided, further,
That the Conversion Authority and the John Hay Management Corporation
(JHMC) shall only engage in acquiring, owning, holding, administering or
leasing real properties, and in other activities incidental thereto.
• See slides 43 to 53 for incentives under P.D. No. 66.
K. J. Culajara, CPA, JD
10

JOHN HAY SPECIAL ECONOMIC ZONE
(JHSEZ)
• In lieu of all national and local taxes except real property tax on land, a five
percent (5%) tax on gross income earned shall be paid by all registered
business enterprises which shall be directly remitted as follows: three
percent (3%) to the National Government, and two percent (2%) to the
treasurer's office of the municipality or city where they are located.
K. J. Culajara, CPA, JD
PREFERRED AREAS OF INVESTMENTS
“Preferred areas of investments” shall mean the economic activities that
the Board shall have declared as such in accordance with Article 28 which
shall be either non-pioneer or pioneer. 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 employing economic criteria along with market, technical,
and financial analyses.
K. J. Culajara, CPA, JD
INVESTMENTS PRIORITY PLAN
“Investment Priorities Plan” shall mean the over-all plan prepared by the
Board which includes and contains:
• The specific activities and generic categories of economic activity wherein
investments are to be encouraged and the corresponding products and
commodities to be grown, processed or manufactured pursuant thereto for
the domestic or export market;
• Specific public utilities which can qualify for incentives under this Code and
which shall be supported by studies of existing and prospective regional
demands for the services of such public utilities in the light of the 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;
K. J. Culajara, CPA, JD
06/09/2020
OMNIBUS INVESTMENTS CODE
OF 1987
(BOOK 1 OF E.O. NO. 226)
K. J. Culajara, CPA, JD
PREFERRED AREAS OF INVESTMENTS
The Board shall take into account the following:
• Primarily, the economic soundness of the specific activity as shown by its
economic internal rate of return;
• The extent of contribution of an activity to a specific development goal;
• Other indicators of comparative advantage;
• Measured capacity;
• The market and technical aspects and considerations of the activity
proposed to be included.
K. J. Culajara, CPA, JD
INVESTMENTS PRIORITY PLAN
• Specific activities where the potential for utilization of indigenous non-
petroleum based fuels or sources of energy can be best promoted; and
• Such other information, analyses, data, guidelines or criteria as the Board
may deem appropriate.
• The specific and generic activities to be included in the Investment Priorities
Plan with their status as pioneer or non-pioneer shall be determined by the
Board in accordance with the criteria set forth in this Book.
Not later than the end of March of every year, 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.
K. J. Culajara, CPA, JD
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REGISTRATION OF INVESTMENTS
The applicant must be
• 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 I
• In case of a corporation or a cooperative, it is organized under Philippine
laws and that at least sixty percent (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 percent (60%) of the
members of the Board of Directors are citizens of the Philippines.
K. J. Culajara, CPA, JD
REGISTRATION OF INVESTMENTS
• 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 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 is 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.
K. J. Culajara, CPA, JD
REGISTRATION OF INVESTMENTS
• Applications shall be filed with the Board, recorded in a registration book
and the date appearing therein and stamped on the application shall be
considered the date of official acceptance.
• Whenever necessary, the Board, through the People’s Economic Councils,
shall consult the communities affected on the acceptability of locating the
registered enterprise within their community.
• Applications filed shall be considered automatically approved if not acted
upon by the Board within twenty’ (20 working days from official acceptance
thereof.
K. J. Culajara, CPA, JD
06/09/2020
REGISTRATION OF INVESTMENTS
When the applicant does not possess the required degree of Filipino ownership,
it must be satisfactorily established that:
• It proposes to engage in a pioneer project;
• It obligates itself to attain the status of a Philippine national within 30 years
from the date of registration or within such longer period as the Board may
require. Note: A registered enterprise which exports 100% of its total
production need not comply with this requirement.
• The pioneer area it will engage in is one that is not within the activities
reserved by the Constitution or other laws to Philippine citizens or
corporations owned and controlled by Philippine citizens.
K. J. Culajara, CPA, JD
REGISTRATION OF INVESTMENTS
• The applicant is capable of operating on a sound and efficient basis and of
contributing to the national development of the preferred area in particular
and of the national economy in general; and
• 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 each preferred project if the Board should so
require to facilitate proper implementation of this Code.
K. J. Culajara, CPA, JD
FISCAL INCENTIVES
Income tax holiday – the registered enterprise shall be exempt from income taxes
• Pioneer firms – 6 years from commercial operation
• Non-pioneer firms – 4 years from commercial operation
• Registered expanding firms – 3 years from commercial operation. Note: No extension period
is allowed.
The income tax exemption will be extended for another year in each of the following cases:
• The project meets the prescribed ratio of capital equipment to number of workers set by the
Board.
• Utilization of indigenous raw materials at rates set by the Board.
• Net foreign exchange savings or earnings amount to at least US$500,000 annually during the
first 3 years of operation.
Note: No registered pioneer firm may avail of the incentive for a period exceeding 8 years.
K. J. Culajara, CPA, JD
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FISCAL INCENTIVES
Additional deduction for labor expenses
• Additional deduction from taxable income of 50% of wages corresponding
to direct labor if the project meets the prescribed ratio of capital equipment
to number of workers set by the Board. Note: This becomes 100%
deduction for less-developed-area registered enterprise.
• This is available for the first 5 years from registration.
Tax and duty exemption on imported capital
• This is available within 5 years from the effectivity of this Code. Hence, this
incentive is no longer available now.
K. J. Culajara, CPA, JD
FISCAL INCENTIVES
Exemption from contractor’s tax
The registered enterprise shall be exempt from the payment of contractor’s tax, whether
national or local.
Employment of foreign nationals
• 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.
• Foreign nationals under employment contract within the purview of this incentive, their
spouses and unmarried children under twenty-one (21) years of age, who are not
excluded by Section 29 of Commonwealth Act. Numbered 613, as amended, shall be
permitted to enter and reside in the Philippines during the period of employment of such
foreign nationals.
K. J. Culajara, CPA, JD
FISCAL INCENTIVES
Tax credit for taxes and duties on raw materials
Every registered enterprise shall enjoy a tax 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.
Other incentives
• Access t bonded manufacturing/trading warehouse system
• Exemption from taxes and duties on imported spare parts (provided that at least 70% of
production is exported)
• Exemption from wharfage dues and export tax
K. J. Culajara, CPA, JD
06/09/2020
FISCAL INCENTIVES
Tax credit on domestic capital equipment
• A tax credit equivalent to one hundred percent (100%) of the value of the
national internal revenue taxes and customs duties that would have been
waived 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.
• One of the conditions to avail of this incentive is that the purchase is made
within 5 years from the date of effectivity of this Code. Hence, this is no
longer available now.
K. J. Culajara, CPA, JD
FISCAL INCENTIVES
Exemption on breeding stocks and genetic materials
The importation of breeding stocks and genetic materials within ten (10) years from the date
of registration or commercial operation of the enterprise shall be exempt from all taxes and
duties:.
Tax credit on domestic breeding stocks and genetic materials
• A tax 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 genetic materials from a domestic
producer:.
• The purchase must have been made within 10 years from the date of registration or
commercial operation of the registered enterprise.
K. J. Culajara, CPA, JD
FISCAL INCENTIVES EXCLUSIVE TO LESS-
DEVELOPED AREA REGISTERED ENTERPRISES
• Pioneer incentives
• Incentives for necessary and major infrastructure and public facilities –
Registered enterprises establishing their production, processing or manufacturing
plants in an area that the Board designates as necessary for the proper dispersal
of industry or in an area which the Board finds deficient in infrastructure, public
utilities, and other facilities, such as irrigation, drainage or other similar
waterworks infrastructure may deduct from taxable income an amount equivalent
to one hundred percent (100%) of necessary and major infrastructure works it
may have undertaken with the prior approval of the Board in consultation with
other government agencies concerned, Provided, That the title to all such
infrastructure works shall upon completion, be transferred to the Philippine
Government: Provided, further, That any amount not deducted for a particular
year may be carried over for deduction for subsequent years not exceeding ten
(10) years from commercial operation.
K. J. Culajara, CPA, JD
13