Republic Act No.

7916

AMENDED BY

Republic Act No. 8748

The Special Economic Zone Act of 1995

An act providing for the legal framework and
mechanisms for the creation, operation,
administration, and coordination of Special
Economic Zones in the Philippines
Created the Philippine Economic Zone Authority
(PEZA)

What are Special

economic Zones?
Highly developed areas have the potential to be developed into:
Agro-industrial Centers
Industrial Centers
Tourists/Recreational Centers
Commercial Centers
Banking Centers
Investment Centers
Financial Centers

And contains the

following:

Important
Terms

Free Trade Zone

Customs Territory
Restricted Area
ECOZONE Export Enterprise
ECOZONE Domestic Market Enterprise
ECOZONE Free Trade Enterprise
ECOZONE Utilities Enterprise
ECOZONE Facilities Enterprise
ECOZONE Developer/Operator
ECOZONE Tourism Enterprise
ECOZONE Pioneer Operator

Industrial Estates
Export Processing Zones
Free Trade Zones
Tourist/ Recreational Centers

FISCAL INCENTIVES
ECOZONE Developers/Operators
(EDO)

Exemption from National and

Local Taxes and Licenses
a) Gross Receipts Tax, VAT and
Ad Valorem and excise taxes
b) Franchise, common carriers
tax/VAT and other OPT on
public service utilities and
enterprise
*In lieu of these taxes EDO shall
pay a 5% final tax on gross
income.

Additional Deduction for Training

Expenses
One-half (1/2) of the value of training
expenses incurred in developing
skilled or unskilled labor or for
managerial or other management
development programs from the 5%
final tax due but not to exceed the
national governments share of three
percent (3%)

ECOZONE Export & Free Trade Enterprise

(EEFTE)
Exemption from Duties and Taxes on
Merchandise
a) Importation on Capital Equipments
b) Importations f Construction Materials,
supplies and articles
c) Importation of Specialized Office Equipment
and Furniture
d) Importation of Specialized Vehicles and
Other Transportation Equipment
e) Importation of Professional Instruments and
Household Effects
Exemption from
National and Local
Taxes and Licenses
Additional
Deduction for
Training Expenses
Exemption from
Wharfage Dues,
Export Tax

ECOZONE Domestic Market,

Facilities, Utilities and Tourism
Enterprises
( EDMFUTE)
Exemption from National
and Local Taxes and Licenses
Additional Deduction for
Training Expenses

Tax Credit on Domestic Capital

Equipment
100% of the value of NIR 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 or
expanding EEFTE which purchases
machinery, equipment and spare parts
from a domestic manufacturer.

Income Tax Holiday

a) New Registered Pioneer Firms - Six (6) years from
commercial operations.
b) New Registered Non-Pioneer Firms - four (4) years
from commercial operations.
c) Expanding Firms - Three (3) years from commercial
operation of the expansion.
Income Tax Holiday for New Expansion
Project
=

*SALES shall be expressed in volume of homogenous products

and value in case of heterogeneous products.
SALES of the registered product

Gross Income Taxation

The 5% Special Income Tax on Gross Income shall be directly paid and remitted
a) 3% to the National Government
b) 2% to the Treasurer Office of the Municipality or City where the ECOZONE registered enterprise is located
Allowable Deductions
ECOZONE Export, Free Trade and Domestic Enterprises
a )Direct salaries, wages or labor expenses; b) Production supervision
salaries; c) Raw materials used in the manufacture of products; d)
Goods in process (intermediate goods); e) Finished goods; f) supplies
and fuels used in production; g) Depreciation of machinery and
equipment used in production and buildings owned or constructed
by an ECOZONE Enterprise; h) Rent and utility charges associated
with building, equipment and warehouses, or handling of goods; i)
Financing charges associated with fixed assets

ECOZONE Developer/Operator, Facilities,

Utilities and Tourism Enterprises
a)Direct salaries, wages or labor expenses;
b)Service supervision salaries; c)Direct
materials, supplies used or resold to another
ECOZONE Enterprise; d) Depreciation of
machinery, equipment and buildings owned
and/or constructed; e)Financing charges
associated with fixed assets; f) Rent and utility
charges for buildings and capital equipment