PREFERENTIAL TAXATION

Part 2
(PEZA LAW, TIEZA LAW, EO 226)
 EO 226 Republic Act 7916 Republic Act 9593
THE OMNIBUS The Special The Tourism Act of
INVESTMENTS Economic Zone Act 2009
CODE OF 1987 of 1995

(PEZA LAW) (TIEZA LAW)

Executive Order 226
THE OMNIBUS INVESTMENTS CODE OF 1987

Board of Investments:
7 governors:
1 – Secretary of Trade and Industry
3 - Undersecretary of Trade and Industry
(chosen by Pres.)
3 - Representatives from other government
agencies and the private sector.
BOOK I - INVESTMENTS WITH INCENTIVES
BOOK II - FOREIGN INVESTMENTS WITHOUT INCENTIVES
BOOK III - INCENTIVES TO MULTINATIONAL COMPANIES ESTABLISHES REGIONAL OR
AREA HEADQUARTERS IN THE PHILIPPINES
BOOK IV - INCENTIVES TO MULTINATIONAL COMPANIES ESTABLISHING REGIONAL
WAREHOUSES TO SUPPLY SPARE PARTS OR MANUFACTURED
COMPONENTS AND RAW MATERIALS TO THE ASIA-PACIFIC REGION
AND OTHER FOREIGN MARKETS
BOOK V - SPECIAL INVESTORS RESIDENT VISA
BOOK VI - INCENTIVES OF EXPORT PROCESSING ZONE ENTERPRISES
• The Board of Investments is the primary agency tasked by the government to
promote investments in the Philippines. It periodically identifies economic
activities to include in the government’s Investment Priority Plan (IPP), and devises
a host of incentive schemes to encourage investments in these activities.
Executive Order 226
THE OMNIBUS INVESTMENTS CODE OF 1987
Executive Order 226
THE OMNIBUS INVESTMENTS CODE OF 1987
1. citizen of the
Philippines, in case the
applicant is a natural
person, or in case of a
partnership or any
other association,
2. at least sixty per cent
(60%) of the capital
stock outstanding and
entitled to vote is
owned and held by
Philippine nationals
3. at least sixty per cent
(60%) of the members
of the Board of
Directors are citizens of
the Philippines
LET’S PRACTICE! BACK to
PHILS. CORPORATION, was incorporated in 2018, START
and registered with BOI as a pioneer status. It
also started its commercial operations in 2018.
It has the following data in its 2021 financial
statements. How much should be the tax due of
the corporation?
Republic Act 7916:
The Special Economic Zone Act of 1995
Republic Act 7916:
The Special Economic Zone Act of 1995

PEZA Board:
1 – Director General (Dept. Undersecretary)
3 – Deputy Directors (appointed by PEZA
Board)
8 - members as follows:
the Secretaries or their representatives of
the Department of Trade and Industry, the
Department of Finance, the Department of
Labor and Employment, the Department of
the Interior and Local Government, the
National Economic and Development
Authority, and the Bangko Sentral ng
Pilipinas, one (1) representative from the
labor sector, and one (1) representative
from the investors/business sector in the
ECOZONE.
Before: EPZA (Pres. Dec. 66)
Now: PEZA
PEZA BOARD
PHILIPPINE ECONOMIC ZONE AUTHORITY
PHILIPPINE ECONOMIC ZONE AUTHORITY
Republic Act 7916:
The Special Economic Zone Act of 1995
Republic Act 7916:
The Special Economic Zone Act of 1995
Republic Act 7916:
The Special Economic Zone Act of 1995
FISCAL INCENTIVES
• Export enterprises may be granted an Income Tax
Holiday (ITH) of four (4) to seven (7) years depending on
the location and industry priorities
• After ITH, export enterprises can avail a 5% Special
Corporate Income Tax OR Enhanced Deductions for 10
years.
• Export companies availing the 5% SCIT based on
gross income shall pay and remit as follows:
• 3% to be remitted to the National Government
• 2% to be remitted to the Treasury of the host Local
Government Unit
Republic Act 7916:
The Special Economic Zone Act of 1995
FISCAL INCENTIVES
• Tax-and-duty-free importation of capital equipment, raw materials, spare
parts or accessories
• VAT exemption on importation and VAT zero-rating on local purchases for
goods and services directly or exclusively used in the registered project or
activity of export enterprise for the period of registration of the said
project or activity.
• Domestic sales allowance of up to 30% of total sales
• Exemption from payment of local government taxes and fees for the
duration of the period of availment of the 5% SCIT incentive (except real
property tax on land owned by developers.)
Republic Act 7916:
The Special Economic Zone Act of 1995
NON-FISCAL INCENTIVES
• Special non-immigrant visa with multiple entry privileges for foreign investors and
immediate family members
For the following non-resident Foreign Nationals in a PEZA-registered Economic Zone Enterprise :
Investor/s, officers, and employees in supervisory, technical or advisory position, and their spouses
and unmarried children under twenty-one years of age. PEZA extends Visa Facilitation Assistance to
foreign nationals their spouses and dependents

• Employment of foreign nationals

• May be employed by PEZA-registered Economic Zone Enterprises in supervisory, technical or
advisory positions.

• Long-term land lease of up to 75 years

• Lands and buildings in each ECOZONE may be leased to foreign investors for a period not
exceeding fifty (50) years, renewable once for a period of not more than twenty-five (25) years,
as provided for under Republic Act No. 7652, otherwise known as the Investors’ Lease Act.
LET’S PRACTICE! BACK to
TOKYO PARTS CORPORATION, was incorporated in START
2018. It also started its commercial operations in
2018.
It has the following data in its 2021 financial
statements. How much should be the tax due of
the corporation?
Republic Act 9593:
The Tourism Act of 2009
Incentives available to TIEZA-registered
enterprises
• Registered TEZ operators and enterprises are entitled to the following fiscal
and non-fiscal incentives.
1. Income Tax Holiday (ITH)
• New enterprises in Greenfield and Brownfield Tourism Zones shall be entitled to six (6) years ITH
from start of business operations, which may be extended up to a maximum of six (6) years if the
enterprise undertakes substantial expansion or upgrade prior to the expiration of its first six (6)
years ITH.
• An existing enterprise in a Brownfield Zone may avail of a maximum of six (6) years non-
extendible ITH if it undertakes extensive expansion or upgrade of facilities.
• • Net operating losses for any taxable year immediately preceding the current taxable year
which had not been previously offset as deduction from gross income, may be carried over as
deduction from gross income for the next six (6) consecutive years immediately following the
year of the loss.
Incentives available to TIEZA-registered
enterprises
2. Gross Income Taxation
• Final tax of five percent (5%) on gross income earned in lieu of all other national and local taxes,
license fees, imposts and assessments, except real estate taxes, and such fees as may be imposed
by TIEZA, after the ITH.

3. Exemption of one hundred percent (100%) from all taxes and customs duties on importation
of capital investment and equipment that will be used directly, actually, and exclusively by the
enterprise in its registered activity.

4. Exemption from customs duties and national taxes on importation of transportation

equipment and accompanying spare parts that are reasonably needed and will be exclusively
used by the accredited enterprise, provided they are not manufactured locally in sufficient
quantity, of comparable quality, and at reasonable prices.
Incentives available to TIEZA-registered
enterprises
5. Goods and Services
• Exemption of one hundred percent (100%) from all taxes and customs duties on importation of
goods actually consumed in the course of services actually rendered by or through the registered
enterprise, excluding goods imported for the purpose of operating a wholesale or retail
establishment in competition with the Duty Free Philippines Corporation.
• Tax credit equivalent to all national internal revenue taxes paid on all locally sourced goods
and services directly or indirectly used by the registered enterprise within the TEZ.

6. Social Responsibility Incentive Tax deduction equivalent to a reasonable percentage, not

exceeding fifty percent (50%), of the cost of environmental protection or cultural heritage
preservation activities, sustainable livelihood programs for local communities, and other similar
services.
7. Employment of foreign nationals in executive, supervisory, technical, and advisory positions
for reasonable periods and under such terms as approved by TIEZA.
Incentives available to TIEZA-registered
enterprises
8. Special Investor’s Resident Visa
• A foreign national with a minimum investment of US$200,000 in a registered enterprise
shall be entitled to a special investor’s resident visa enabling the foreign national to reside
in the Philippines while his or her investment subsists.
• Working visas renewable every two (2) years shall be issued to foreign personnel and
other aliens possessing highly-technical skills, subject to certain conditions.

9. Foreign Currency Transactions

Subject to appropriate rules and regulations of the Bangko Sentral ng Pilipinas, registered
enterprises are guaranteed the right to repatriate entire proceeds of the liquidation of the foreign
investment or remit earnings from foreign investment, in the currency in which the investment was
originally made and at the exchange rate prevailing at the time of repatriation; and in the
case of foreign loans and foreign obligations arising from technological assistance contracts, the
right to remit at the exchange rate prevailing at the time of remittance such sums as may be
necessary to meet the payment of interest and principal.
Incentives available to TIEZA-registered
enterprises
10. Requisition of Investment
Protection from requisition of the property of the registered enterprise except in cases of war or
national emergency, subject to payment of just compensation and repatriation of such
compensation.

11. Lease and Ownership of Land

• Subject to conditions set forth under the Investor’s Lease Act, lands and buildings in each TEZ
may be leased to foreign investors for a period not exceeding fifty (50) years, renewable once for a
period not more than twenty-five (25) years.
• Leasehold right acquired under long-term contracts may generally be sold, transferred, or
assigned.