Fiscal Incentives - RA 7227, as amended by RA 9400 - Clark SEZ

Initially, the enactment of RA 7227 or the Bases Conversion and Development Act provides for the creation of the Subic Special Economic and Freeport Zone (SSEFZ). RA 7227 likewise authorized the President, subject to the concurrence of the local government units directly affected, to
create through executive proclamation other SEZs in the areas.

Thus, the Clark Special Economic Zone (CSEZ) was created by virtue of EO 80 (April 3, 1993), the John Hay Special Economic Zone (JHSEZ) per Proclamation 420 (July 5, 1994), the Poro Point Special Economic Zone (PPSEZ) per Proclamation 216 (July 27, 1993) and the Bataan Technology Park (Morong Special Economic Zone or MSEZ) through Proclamation 984 (March 26, 1997). Enterprises inside these ecozones are entitled to incentives which include the following:

1. Exemption from national and local taxes. In lieu of these taxes, they shall pay a tax equivalent to 5% of their gross income; and

2. Tax and duty-free importations of raw materials and capital equipment.

However, SC nullified JHSEZ and CSEZ's tax incentives on the constitutionality issues.


To restore the tax and duty privileges of CSEZ, Proclamation 1035 (Creating and Designating Certain Parcels of Land of the Public Domain situated at Angeles City, Municipalities of Mabalacat and Porac, Pampanga and the Municipalities of Capas and Bamban, Tarlac as a Special Economic Zone
Pursuant to RA 7916 as Amended by RA 8748, March 10, 2006) designated the area covered by the CSEZ as a special economic zone under RA 7916, as amended, to enable the investors to avail of the PEZA incentives.

An agreement was also made by the Clark Development Corporation and the PEZA for the official transfer of the area covered by the CSEZ as special economic zone pursuant to RA 7916, as amended, effective March 10, 2006.

The enactment of RA 9400 (March 20, 2007) ultimately resolved the constitutionality issue on the grant of tax incentives to these ecozones created by RA 7227. RA 9400 categorically grants tax incentives to the CSEZ, SSEFZ, JHSEZ, PPSEZ, and other ecozones to be created under RA 7227. RA 9400 also extends to the PPFZ the same tax privileges available to the Subic and Clark freeports as well as the tax privileges available to enterprises locating in said freeports. RA 9400 also provides for the tax privileges of business enterprises in the MSEZ. These tax privileges are also similar to those granted to enterprises locating in the Subic or Clark Freeport. Additionally, RA 9400 provides that business enterprises in the JHEZ shall be entitled to the tax privileges of RA 7916. For this purpose, these enterprises shall be registered, regulated and supervised by the PEZA.