Fiscal Incentives - RA 7916, as amended by RA 8748 - PEZA

RA 7916 or the Special Economic Zone Act of 1995 (February 24, 1995) provides the framework for the transformation, formation and monitoring of certain designated areas in the country called special economic zones (ecozones) where companies and industries establishing their operations therein are given incentives and privileges.

Enterprises locating or operating within the ecozones shall register with the Philippine Export Zone Authority (PEZA) and are entitled to similar incentives granted as provided for under PD 66 or those provided under Book VI of EO 226. These incentives include:


1. Exemption from the payment of all national and local taxes, except the real property tax on land owned by developers. In lieu thereof, they shall pay a tax equivalent to five percent (5%) of their gross income;



2. Exemption from taxes and duties on imported equipment, raw materials and supplies directly needed for its operations;

3. Additional deduction for training expense;

4. Incentives under the Build-Operate-Transfer (BOT) Law; and

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

Several other special economic zones were also established under separate laws. Foremost of which
is RA 7227 which established the Subic Bay Free Port Zone (under the administration of the Subic Bay Metropolitan Authority) and the Clark Special Economic Zone (under the management of the Clark Development Corporation).

Moreover, the creation of several special economic zones in various parts of the country follow through wherein enterprises located in these special economic zones are also entitled to the same benefits and privileges extended to PEZA registered firms. These ecozones are located in the City of Zamboanga (pursuant to RA 7903) and in the provinces of Cagayan (pursuant to RA 7922), Aurora
(pursuant to RA 9490) and Bataan (pursuant to RA 9728).