icvilindieniti HOUSE °F REPR’
‘epublic of the Philippines cern ir
HOUSE OF REPRESENTATIVES, RECENVLU

Constitution Hills, Quezon City pare 15 AUG 2016

sive Git
BY:

SEVENTEENTH CONGRESS
First Regular Session

REGISTRATION UNIT

o
HOUSE BILL No.2227

Introduced by Representatives PANTALEON D. ALVAREZ and ANTONIO R.
FLOIRENDO, JR.

EXPLANATORY NOTE

This bill seeks the establishment of a special economic zone and freeport in the
Island Garden City of Samal, Province of Davao del Norte.

Poverty of majority of Filipinos is an issue of national concern, which the
government should immediately address. If government wants to minimize, if not
eradicate poverty and hasten economic recovery of the country, it should enact measures
to encourage the infusion of foreign investments to generate employment for our people
thereby improving their quality of life.

The establishment of an economic zone in the Island Garden City of Samal is
proffered as a vehicle that would contribute to the urgent national effort of curbing poverty.
‘As proposed, the zone will be a self-sustaining industrial, commercial, tourist/recreational,
banking, investment and financial center, introducing attractive features of free port
commerce similar to Hong Kong, Singapore and Labuan, Malaysia. Customs duty and
tariff-free trade or imported goods, preferential tax treatment for operators, lenient

BILLS AND WOE X SERVICE


Immigration laws and other forms of incentives characterize the business climate within
the economic zone to encourage potential foreign investors.

Likewise, the Samal Island Special Economic Zone and Freeport Authority
(SISEZFA) is also created to oversee the operation and: management of economic zone
The proposed measure once enacted into law will bolster the realization of the country's

dream of becoming the "Economic Miracle of Asia.”

Hence, the early approval of this bill is earnestly sought.

PANTALEON D. ALY, \NTONIO OIRENDO, JRé
Representative
él Norte Second District, Davao del Morte

Representativ
First District, Davao


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Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

SEVENTEENTH CONGRESS
+t Regular Session

HOUSE BILL NO, 2227

Introduced by Representatives PANTALEON D. ALVAREZ and ANTONIO R.
FLOIRENDO, JR.

AN ACT
ESTABLISHING A SPECIAL ECONOMIC ZONE IN THE ISLAND GARDEN
CITY OF SAMAL IN THE PROVINCE OF DAVAO DEL NORTE, CREATING
FOR THAT PURPOSE THE SAMAL ISLAND SPECIAL ECONOMIC ZONE
AUTHORITY, APPROPRIATING FUNDS THEREFOR AND FOR OTHER
PURPOSES

Be it enacted by the Senate and the House of Representatives of the Philippines in
Congress assembled:

CHAPTER I
GENERAL PROVISIONS,

Section 1. Short Title. ~ This Act shall be known as the

samal Island Special
Economic Zone Act of 2016.”

Section 2. Declaration of Poliey. ~ It is hereby declared the policy of the State to
actively encourage, promote, induce and accelerate the sound and balanced industrial,
economic and social development of the country in order to provide jobs to the people
especially those in the rural areas, increase productivity and individual and family
income, and thereby improve the level and quality of livin;

conditions through the

establishment, among others, of special economic zones and freeport in suitable and


CHAPTER II
CREATION OF THE ECOZONE

Section 3. Creation of the Samal Island Special Economic Zone and Freeport.

In pursuit of the foregoing declared policy and subject to the concurrence of the
concerned local government units (LGUs) of Davao del Norte affected by the zone, there
is hereby established a special economic zone and Freeport in the Island Garden City of
Samal in the Province of Davao de Norte to be known as the Samal Island Special
Economic Zone, hereinafter referred to as the Samal Island Ecozone. The specific metes
and bounds of the Samal Island Ecozone shall be more particularly defined in a

presidential proclamation that shall be issued for this purpose.

Section 4. Governing Principles. — The Samal Island Ecozone shall be managed
and operated by the Samal Island Special Economic Zone Authority, hereinafter referred

to as the SISEZA created under Section 5 of this Act, under the following principles:

(a) Within the framework and limitations of the Constitution and the
applicable provisions of the Local Government Code, as amended, the
Samal Island Ecozone shall be developed into and operated as a
decentralized, self-reliant and self- sustaining industrial,
commercialtrading, agro-industrial, tourism, banking, financial and

investment center with suitable residential areas;

(b) The Samal Island Ecozone shall be provided with transportation,

telecommunications and other facilities needed to attract legitimate and
productive investments, generate linkage industries and employment
opportunities for the people of the Province of Davao del Norte and its

neighboring towns and cities:


(©) The Samal Island Ecozone may establish mutually beneficial economic
relations with other entities or enterprises within the country or, subject to
the administrative guidance of the Department of Foreign Affairs (DFA),
the Philippine Economic Zone Authority (PEZA) and/or the Department
of Trade and Industry (DTD, with foreign entities or enterprises;

(d) Foreign citizens and companies owned by non-Filipinos in whatever
proportion may set up enterprises in the Samal Island Ecozone, either by
themselves or in joint venture with Filipinos in any sector of industry,

international trade and commerce within the Samal Island Ecozone;

(@) The Samal Island Ecozone shall be managed and operated as a
separate customs territory ensuring free flow or movement of goods and

capital within into and out of its territory;

() The Samal Island Ecozone may provide incentives such as tax and
duty-free importations of raw materials, capital equipment to registered
enterprises located therein. However, exportation or removal of goods
from the territory of the Samal Island Ecozone to the other parts of the
Philippine territory shall be subject to customs duties and taxes under the
Tariff and Customs Code of the Philippines, as amended, and the National
Internal Revenue Code (NIRC) of 1997, as amended;

(g) The areas comprising the Samal Island Ecozone may be expanded or
reduced when necessary. For this purpose, the SISEZA, in consultation
with the LGUs, shall have the power to acquire either by purchase,
negotiation or condemnation proceedings, any private land within or
adjacent to the Samal Island Ecozone for the following purposes: (1)

consolidation of lands for the Samal Island Ecozone development; (2)

acquisition of right-of-way to the Samal Island Ecozone; and (3) the


protection of watershed areas and natural assets valuable to the prosperity
of the Samal Island Ecozone;

(h) Goods manufactured by Samal Island Ecozone enterprise shall be
made available for immediate retail sale in the domestic market, subject to
the payment of corresponding taxes on raw materials and other regulations
that may be formulated by the SISEZA, together with the PEZA, the
Bureau of Customs (BoC) and the DTI. However, in order to protect
domestic industries, a negative list of industries shall be drawn up and
regularly updated by the PEZA and the Board of Investments (BOI).
Enterprises engaged in industries included in such negative list shall not

be allowed to sell their products locally; and

(The defense of the Samal Island Ecozone and the security of its
perimeter fence shall be the responsibility of the national government in
coordination with the Samal Island Ecozone and the LGUs concerned. For
this purpose, a special defense team shall be organized to define its power,

duties and responsibilities.

CHAPTER IIL
GOVERNING STRUCTURES

Section 5. Creation of the Samal Island Special Economic Zone and Freeport
Authority, ~ There is hereby created a body corporate to be known as the Samal Island
‘A,

Special Economic Zone and Freeport Authority, hereinafter referred to as the $

which shall manage and operate the Samal Island Ecozone in accordance with the

ions of this Act.

pro corporate franchise shall expire in fifty (50) years counted
from the first year after the effectivity of this Act, unless otherwise extended by
Congress. It shall be organized within one hundred eighty (180) days after the effectivity

of this Act.


Section 6. Capitalization - The SISEZA shall have an authorized capital stock
of two billion (2,000,000,000) no-par value shares with a minimum issue of Ten Pesos
(P10.00) each, the majority shares of which shall be subscribed and paid for by the
national government and the LGUs embracing the Samal Island Ecozone. The Board of
Directors of the SISEZA may

sell shares, representing not more than forty per centum (40%) of the capital stock of the

with the written concurrence of the Secretary of Finance,

SISEZA to the general public under such policy as the Board and the Secretary of

Finance may determine. The national government and the LGUs shall, in no case, own
less than sixty per centum (60%) of the total issued and outstanding capital of the

SISEZA.

The amount necessary to subscribe and pay for the shares of the national
government to the capital stock of the SISEZA shall be included in the annual General
Appropriations Act. For LGUs, the funds shall be taken from their intemal revenue

allotment and other local funds.

Section 7. Principal Office of the Samal Island Special Economie Zone
Authority. — The SISEZA shall maintain its principal office in Samal District, Davao del
Norte, but it may establish branches within the Philippines as may be necessary for the

proper conduct of its business.

Section 8. Powers and Functions of the SISEZA. - The SISEZA shall have the

following functions:

(a) Recommend to the President of the Philippines the issuance of a

proclamation to fix and delimit the site of the Samal Island Ecozone;

(b) Operate, administer, manage and develop the Samal Island Ecozone

according to the principles and provisions set forth in this Act;


(©) Register, regulate and supervise the enterprises in the Samal Island

Ecozone in an efficient and decentralized manner, subject to existing laws;

(d) Issue certificates of origin for products manufactured or processed in the
Samal Island Ecozone in accordance with prevailing rules of origin, and the
pertinent regulations of the PEZA, the DTI and/or Department of Finance
(DOF);

(e) Authorize or undertake, on its own or through others, and regulate the

establishment, operation and maintenance of:

e.1 public utilities, services, and infrastructure in the Samal Island
Ecozone such as shipping, barging, stevedoring, cargo handling and
storage, warehousing, port services or concessions, piers, wharves,
bulkheads, bulk terminals, mooring areas, storage areas, roads, toll roads,
bridges, terminals, conveyors, sewerage, drainage, and airport operations in

coordination with the Civil Aviation Authority of the Philippines (CAAP),

22 such other utilities or services such as, but not limited to heat, light and
power, water supply and storage, telecommunications, and transport
necessary or incidental to the accomplishment of the objectives of this Act,
and fix just, reasonable and competitive rates, fares, charges and prices
thereof. Provided, however, That the private investors in the Samal Island
Ecozone shall be given priority in the awarding of contracts, franchises,

licenses, or permits for the establishment, operation and maintenance of

utilities, services and infrastructure in the Samal Island Ecozone;

(8) Construct, acquire, own, lease, operate and maintain on its own or through
contracts, franchise, licenses, bulk purchase from the private sector or permits
under any of the schemes allowed in Republic Act No. 6957 (the Build-Operate-

Transfer Law, as amended), or joint venture, adequate facilities and


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infrastructures required or needed for the operation and development of the
Samal Island Ecozone, in coordination with appropriate national and local

government authorities and in conformity with applicable laws thereon;

(g) Operate on its own, either directly or through a subsidiary entity, or
concession or license to other, tourism-related activities and sports facilities, such

as golf courses and others, under priorities and standards set by SISEZA;

(h) Protect, preserve, maintain and develop the virgin forests, beaches, coral and

coral reefs, and maintain ecological balance within the Samal Island Ecozone;

(i) Create, operate and/or contract to operate such functional units or offices

of the SISEZA as it may deem necessary:

()_ Adopt, alter and use a corporate seal; contract, lease, buy, acquire, own or
otherwise dispose of personal and/or real property of whatever nature; sue
and be sued; and otherwise carry out its functions and duties as provided for

in this Act;

(k) Subject to the approval of the President of the Philippines and the
Monetary Board of the Bangko Sentral ng Pilipinas (BSP), upon the
recommendation of the DOF, to raise or borrow adequate and necessary funds
from local or foreign sources to finance its projects and programs under this Act
and for that purpose, to issue bonds, promissory notes and other forms of
securities, and to secure the same by a guarantee, pledge, mortgage, deed of trust
or an assignment of all or part of its property or assets; (I) Issue working visas
renewable every two (2) years to foreign executives and foreign technicians with

highly specialized skills which no F

ino possesses, as certified by the
Department of Labor and Employment (DOLE);


(m) Report to the Bureau of Immigration (BI) the names of the foreigners who
have been granted permanent resident status and working visas within thirty (30)
days after issuance of such grant;

(n) Provide security to the Samal Island Ecozone in coordination with the national
and local governments. Military forces sent by the national government for the
purpose of defense shall not interfere in the internal affairs of the Samal Island
Ecozone and expenditures for these military forces shall be borne by the national
government. For this purpose, the SISEZA may establish and maintain its security

forces and firefighting capability or hire others to provide the same;

(0) Coordinate with LGUs and exercise general supervision over the

development plans, activities and operations of the Samal Island Ecozone;

(p) Exercise such powers as may be essential, necessary or incidental to the
powers granted to it hereunder, as well as those that shall enable it to carry out,

implement and accomplish the purposes, objectives and policies of this Act; and

(q) Issue rules and regulations consistent with the provisions of this Act as may
be necessary to accomplish and implement the purposes, objectives and policies

provided herein.

Section 9. Applicability Clause. — The provisions of Sections 30 to 42 of
Republic Act No, 7916, otherwise known as The Special Economic Zone Act of 1995”,
as amended, on leases of lands and buildings, land conversion, shipping and shipping
register, protection of environment, termination of business, registration of business
enterprises, one-stop shop center and on industrial harmony in the ecozones shall apply to
the SISEZA.



Section 10. Tax Exemptions. — The SISEZA is hereby declared exempt from the
payment of all taxes, duties, fees, imposts, charges, costs, and service fees in any court or

administrative proceedings in which it may be a party.

‘The foregoing exemptions may, however, be entirely or partially lifted by the
President of the Philippines upon the recommendation of the Secretary of Finance, not
earlier than five (5) years from the effectivity of this Act, if the President shall find the
SISEZA to be self-sustaining and financially capable by then to pay such taxes, customs
duties, fees and other charges after providing for debt service requirements of the
SISEZA and of its projected capital and operating expenditures.

Furthermore, all donations made by any person or entity in favor of the SISEZA.
shall be exempt from the payment of the donor’s tax and the same shall be considered as
deductible from the gross income of the donor, pursuant to the NIRC of 1997, as

amended.

Section 11. Administration, Implementation and Monitoring of Incentives. -
The SISEZA shall be responsible for the administration and implementation of the
incentives granted to its respective registered enterprises: Provided, that any incentive
policy adopted by the BOI for incentives common to all registered enterprises shall be
uniformly applied by the SISEZA.

The following are the duties and responsibilities of the SISEZA in the
administration of incentives:

(a) Adopt consistent procedures of administering incentives in accordance with the

guidelines established by the BOI and to amend the same when necessary;

(6) Adopt and implement systems and procedures affecting trade and customs

Policies in accordance with the requirements established by the DOF and the
BOI and to amend the same when necessat



(©) Submit data and information to the DOF and the BOI as required by any of
these agencies to ascertain consistency of investment policies and incentives,
including their implementation as provided in (a) and to ensure proper
implementation of systems and procedures affecting trade and customs policies

as provided in (b); and

(d) Perform all other duties and responsibil as may be required by the President

of the Philippines.

For proper monitoring, the BOI shall create a single database of all incentives
provided by all incentives-granting agencies, including the SISEZA and all information
thereto, Double-entry accounting shall be done by the BOI in recording all incentives

granted by the government for transparency purposes.
Section 12. Board of Directors. — The powers of the SISEZA shall be vested in
and exercised by a board of directors, hereinafter referred to as the Board, which shall be

composed of the following:

(a) The chairperson who shall, at the same time, be the administrator of the
SISEZA;

(b) A vice chairperson who shall come from among the members of the Board;

(©) The members who shall consis

(1) The governor of the Province of Davao del Norte;

2) The congressional representative of the district covering the site of

the Samal Island Ecozone;

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GB) The mayor of the Island Garden City of Samal;

(4) One (1) representative from the domestic investors;

(5) One (1) representative from the foreign investors; and

(6) ‘One (1) labor representative from among the workers in the Samal

Island Ecozone.

The governor, the congressional representative and the mayor of the Island
Garden City of Samal shall serve as ex officio members of the Board, whose terms in the

Board correspond to their terms of office.

The chairperson and the members of the Board, except the ex officio members,
shall be appointed by the President of the Philippines to serve for a term of six (6) years
unless sooner removed for cause or dies or resigns voluntarily. In case of death,
resignation or removal for cause, the replacement shall serve only the unexpired portion

of the term.

The Chairperson must be a Filipino citizen, of good moral character, of proven

probity and integrity, and a degree holder in any of the following fields:

economics,

business, public administration, law, management or their equivalent, and with at least
ten (10) years relevant working experience preferably in the field of management or

public administration.

‘The members of the Board shall each receive per diem at rates to be determined
by the Department of Budget and Management (DBM) in accordance with existing rules

and regulations: Provided, however, That the total per diem collected each month shall

not exceed the equivalent per diem for four (4) meetings. Unless and until the President
of the Philippines has fixed a higher per diem for the members of the Board, such per

diem shall not be more than Ten Thousand Pesos (P10,000.00) for every Board meeting.


chairperson-administrator shall have the following powers and dutie:

Section 13, Powers and Duties of the Chairperson-Administrator. The

(a) Direct and manage the affairs of the SISEZA in accordance with the

policies of the Board;

(b) Establish the internal organization of the SISEZA under such conditions

that the Board may prescribe:

(©) Submit an annual budget and necessary supplemental budget to the Board

for its approval;

(d) Submit within thirty (30) days after the close of each fiscal year an annual

report to the Board and such other reports as may be required;

(©) Submit to the Board for its approval policies, systems. procedures, rules

and regulations that are essential to the operation of the Samal Island Ecozone;

() Create a mechanism in coordination with relevant agencies for the
promotion of industrial peace, the protection of the environment and the

advancement of the quality of life; and

(g) Perform such other duties as may be assigned to him/her by the Board or

which are necessary or incidental to his/her office.

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Section 14. Organization and Personnel. — The Board of Directors of the
SISEZA shall provide for its organization and staff. Upon the recommendation of the
chairperson-administrator, the Board shall appoint and fix the remuneration and other
emoluments of its officers and employees in accordance with existing laws on
Provided, That the Board shall have
ign or reassign officers of the SISE

compensation and position classificatio ive

and final authority to promote, transfer, ZA, any

provision of existing law to the contrary notwithstanding: Provided, further, That the

chairperson-administrator may carry out removal of such officers and employees.

‘The officers and employees of the SISEZA, including all members of the Board,
shall not engage directly or indirectly in partisan activities nor take part in any election,

except to vote.

No officer or employee of the SISEZA, subject to civil service laws and

regulations, shall be removed or suspended except for cause, as provided by law.

Section 15. Legal Counsel. — The SISEZA shall have its own internal legal
counsel under the supervision of the government corporate counsel. When the exigencies
of its businesses and operations demand it, the SISEZA may engage the services of an

outside counsel either on a case to case or on a fixed retainer basis.

CHAPTER IV
INCENTIVES TO ECOZONE ENTERPRISES/INVESTORS

Section 16. Incentives to Registered Enterprises. The S|

shall provide the
following incentives to the registered enterprises located therein to the extent of the

activity/project:

(a) Income Tax Holiday (ITH) ~ Registered enterprises shall be entitled to an
ITH from the start of their commercial operations to the extent of their activity

under the following categories:


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(1) Category A ~ Registered domestic enterprises producing/rendering
new products/services or having strong backward or forward linkages
shall be entitled to a six (6) year ITH; and

(2) Category B — Registered export enterprises shall be entitled to a
six (6)- year ITH: Provided, that an export enterprise shall be entitled to an
eight (8)-year ITH if it complies with the following:

() Large capital investments or sizeable employment
generation; or

(ii) Use of high level technology.

Registered enterprises embarking on new investments that are listed in the current

Investment Priorities Plan (IPP) shall be entitled to incentives provided herein

pertaining to the new investments and subject to such terms and conditions as the

Board of Investments (BOI) may determine.

Additional investments in the project shall be entitled to the ITH corresponding to
such investments as may be determined by the BOI. Additional ITH may be
granted for as long as the investment is made on the same project: Provided, That
the project is listed in the IPP at the same time the additional investment in the
project is made: Provided, further, That the entitlement period for additional
investments shall not exceed three (3) times the period provided under this
subsection: Provided, however, That the total ITH period for an export enterprise
availing of an eight (8)-year ITH shall not exceed twenty (20) years. Any unused
incentive shall therefore be deemed forfeited if not used during the incentive

period.

Enterprises registered with the SISEZA are required to share in the special

development fund of the BOI for investment promotion projects of the

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government equivalent to one percent (1%) of the ITH granted for every

application.

‘The Bureau of Internal Revenue (BIR) shall require a registered enterprise
availing of the ITH or the net operating loss carryover (NOLCO) to secure a
certificate of eligibility from the SISEZA before submitting its income tax retum
(ITR) with the SISEZA for validation.

Failure to secure certification and/or to file the ITH or the NOLCO availment for
validation by the SISEZA wi

in forty-five (45) days from the last day of
statutory filing date for ITR shall cause the forfeiture of the availment for the

taxable period.

(6) NOLCO- The net operating loss of the business or enterprise during the first
three (3) years from the start of commercial operations which have not been
previously offset as a deduction from the gross income shall be carried over as a
deduction from the gross income for the next five (5) consecutive years
immediately following the year of such loss: Provided, however, that operating
loss resulting from the availment of incentives provided in this Code shall not be
entitled to NOLCO.

Registered enterprises availing of the ITH as herein provided shall not be entitled
to avail of the NOLCO.

(c)_ Imposition of a Tax Rate of Percent (5%) on Gross Income Earned

(GIE) -No taxes, local and national, shall be imposed on business establishments

operating within the Samal Island Ecozone. In lieu thereof, there shall be
imposed a tax rate of five percent (5%) of the gross income earned by all the

business enterprises within the SISEZA and remitted as follows:

(1) Two per centum (2%) to the National Government;

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(2) One per centum (1%) for the Province of Davao del Norte;

(3) One per centum (1%) to be shared by the city and municipalities
affected by the declaration of the Zone in proportion to their income
from business activities within the Zone; and

(4) One per centum (1%) to the SISEZA which shall be created under this
Act.

All persons and service establishments in the Samal Island Ecozone that are not
covered by Section 16 hereof shall be subject to national and local taxes under the

NIRC of 1997, as amended, and the Local Government Code, as amended.

(d)_ Accelerated Depreciation — Accelerated depreciation of plant, machinery
and equipment that are reasonably needed and actually used for the production
and transport of goods and services may be allowed using a rate not exceeding
twice the rate which would have been used had the annual allowance been
computed in accordance with the rules and regulations prescribed by the Secretary
of Finance and the provisions of the NIRC of 1997, as amended

(©) Capital Equipment
(e.1) Incentives
(¢.1.1) Importation of machinery, capital equipment and spare parts shall be
exempted to the extent of one hundred percent (100%) of the taxes and
customs duties: Provided, That the importation thereof shall comply with

the following conditions:

() These are not manufactured domestically in sufficient
quantity, of comparable quality and at reasonable prices;

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(ii) These are reasonably needed and will be used exclusively
by the registered enterprise in its registered activity, unless
prior approval of the SISEZA is secured for the part-time
utilization of said equipment in a non-registered activity;
and; and

(ii) Approval of the SISEZA was obtained by the registered
enterprise for the importation of such machinery,

equipment and spare parts.

(€.1.2) Subject to Zero Percent (0%) Value-Added Tax ~ The

purchase of machinery and capital equipment and raw materials, supplies,
parts and semi-finished products used in the fabrication of machinery and
capital equipment by a registered export-oriented enterprise from a domestic

manufacturer shall be subject to zero percent (0%) value-added tax.

(¢.1.3) Tax Credit on Domestic Capital Equipment — The
registered export-oriented enterprise shall be granted a tax credit

equivalent to the amount of duties that would have been waived on the
machinery, capital equipment and raw materials, supplies, parts and semi-
finished products used in the fabrication of machinery and capital
equipment, had these items been imported, upon its submission to the DOF
of the bill of materials evidencing the transaction value of such and other

pertinent documents, for verification and proper endorsement.

The registered export-oriented enterprise availing of the incentives provided
under the immediately preceding two (2) paragraphs shall be subject to the

following: (i) that said capital equipment, machinery and spare parts will be

used exclusively by the registered enterpri

in its registered activity; (ii)
that the capital equipment or machinery where the raw materials, supplies,

parts and semi-finished products were used would have qualified for tax-and

duty-free importation; and (iii) that the approval of the SI

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by the registered enterprise. If the registered enterprise sells, transfers or
disposes of these machineries, capital equipment and spare parts, the
provision in the preceding paragraphs for such disposition shall apply.

This incentive shall be deemed waived if application for tax credit
under this subsection is not filed within one (1) year from the date of

delivery.

(c.2) Sale, Transfer or Disposition of Capital Equipment — Approval of the
SISEZA must be secured before any sale, transfer or disposition of the
imported capital equipment, machinery or spare parts is made: Provided,
that if such sale, transfer or disposition is made within the first five (5) years
from the date of importation, any of the following conditions must be

present:

(i) If made to another enterprise enjoying tax and duty exemption on
imported capital equipment;
Gi) If made to another enterprise not covered by part (i), upon payment

of the taxes and duties on the net book value of the capital equipment to be

(iii) Exportation of the capital equipment, machinery, spare parts or
source documents or those required for pollution abatement and control;
and

(iv) _ For reasons of proven technical obsolescence.

When the aforementioned sale, transfer or disposition is made under any of
the conditions provided for in the foregoing paragraphs other than paragraph
(ii), the registered firm shall not pay the taxes and duties waived on such
items: Provided, further, That if the registered enterprise sells, transfers or
disposes the aforementioned imported items without prior approval within

five (5) years from the date of importation, the registered enterprise and the

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vendee, transferee or assignee shall be solidarily liable to pay twice the
amount of the tax and duty exemption given it: Provided, finally, That even
if the sale, transfer or disposition of the capital equipment, machinery or
spare parts is approved after five (5) years from the date of importation, the
registered enterprise is still liable to pay the taxes and duties based on the
net book value of the capital equipment, machinery or spare parts if it has
violated any of its registration terms and conditions. Otherwise, it shall no

longer be subject to the payment of the taxes and duties waived thereon.

() Tax-and Duty-Free Importation - The importation of source documents by
information technology-registered enterprises shall be eligible for tax-and duty-

free importation.

(g) Raw Material Incentives — Every registered export-oriented enterprise shall
enjoy a tax credit equivalent to the internal revenue taxes and customs duties

paid on the supplies, raw materials and semi-manufactured products: Provided,
‘That the same are not sufficient in quantity, quality or are not competitively
priced which are used in the manufacture, processing or production of its export
products forming part thereof, exported directly and indirectly by the registered
export-oriented enterprise based on the actual taxes and duties paid for such

materials/supplies/semi-manufactured products by the registered enterprise

This incentive shall be deemed waived if application for tax credit under this
subsection was not filed within one (1) year from the date of exportation of the

final product.

(h) Incentives on Breeding Stocks and Genetic Materials ~ Importation of
breeding stocks and genetic materials within ten (10) years from the date of
registration of commercial operation of the enterprise shall be exempt from all
taxes and duties: Provided, that such breeding stocks and genetic materials are
ZA.

reasonably needed in the registered activity and approved by the S|

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The availment of the incentives by a registered enterprise shall be subject to the
following: (1) that said breeding stocks and genetic materials would have been
qualified for tax- and duty-free importation under the preceding paragraph; (2)
that the breeding stocks and genetic materials are reasonably needed in the
registered activity; (3) that approval of the SISEZA has been obtained by the
registered enterprise; and (4) that the purchase is made within ten (10) years from

the date of registration of commercial operation of the registered enterprise.

‘This incentive shall be deemed waived if application for tax credit under this

subsection is not filed within one (1) year from the date of delivery.

() Exemption from Wharfage Dues — The provisions of law to the contrary
notwithstanding, exports by a registered enterprise shall be exempted from

wharfage dues.

(Deferred Imp.

minimum corporate income tax (MCIT) of two percent (2%) of the gross income

ition of the Minimum Corporate Income Tax — The

as of the end of the taxable year shall be imposed when the MCIT is greater than
the income tax computed under the NIRC of 1997, as amended, for the taxable
year: Provided, however, that said MCIT shall be imposed only after the

enterprise’s entitlement period to income tax-based incentives.

(k) Tax Treatment of Goods and Services in the Samal Island Ecozone. — The
treatment of goods and services in the SISEZA shall be as follow:

(k.1) Tax Treatment of Merchandise ~The ecozone shall be operated and

managed as a separate customs territory ensuring free flow or movement of
goods within, into and exported out of the ecozone. Importations of raw
materials and capital equipment are tax- and duty-free. However,

exportations or removal of goods from the ecozone to the other parts of the

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Philippine territory shall be subject to customs and internal revenue

regulations:

(H Except as otherwise provided in this Act, 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, manufactured, mixed with foreign or
domestic merchandise, whether directly or indirectly related in
such activity, shall not be subject to customs and internal revenue
laws and regulations nor to local tax ordinances, any provision of

law to the contrary notwithstanding:

(ii) Merchandise purchased by a registered Samal Island Ecozone

enterprise, from the customs territory and subsequently brought
into the export processing zone, shall be considered as export sales
and exportation thereof shall be entitled to the benefits allowed by

law for such transaction;

(iii) Domestic merchandise sent from the Samal Island Ecozone

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;

(iv) Merchandise sent from the Samal Island Ecozone to the
customs territory shall, whether or not combined with or made part
of other articles while in the zone, be subject to rules and

regulations governing imported merchandise. ‘The duties and taxes

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shall be based on the value of said imported materials (except
when the final product is exempt);

(v) Domestic merchandise on which all internal revenue taxes

have been paid, if subject thereto, and foreign merchandise
previously imported on which has been paid, or which have been
admitted free of duty and tax, may be taken into the Samal Island
Ecozone from the customs territory of the Philippines and be

brought back thereto free of quotas, duty or tax;

(vi) Subject to such regulations respecting identity and

safeguarding of revenue as the SISEZA may deem necessary,
when the identity of an article entered into the export processing
zone under the immediately preceding paragraph 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 of the Philippines, as amended;

(vii) Articles produced or manufactured in the Samal Island
Ecozone 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; and

( shown, merchandise taken out of the

export processing zone shall be considered for tax purposes to have

Unless the contrary i

been sent to customs territory.

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Soc3wwaueon

(k.2) Tax Treatment of Services ~ (i) Sale of service by an entity from the

customs territory to a registered ecozone enterprise, or by a registered
ecozone to another ecozone enterprise shall be treated as indirect export and,
hence, entitled to the benefits allowed by law for such transaction; and (ii)

Sale or service by a registered ecozone enterprise to the customs territory

shall be subject to applicable internal revenue laws and regulations.

() Bonded Warehousing System - Registered export-oriented enterprise shall
have access to the utilization of the bonded warehousing system in accordance

with the rules and regulations of the BoC.

(m) Employment of Foreign Nationals ~ Subject to the provisions of Section 29
‘of Commonwealth Act No. 613 otherwise known as “The Philippine Immigration
Act of 1940”, as amended, a registered enterprise may employ foreign nationals in
supervisory or technical positions for a period not exceeding ten (10) years from

its registration: Provided, That when the majority of the capital stock of a

registered enterprise is owned by foreign investors, the positions of the president,
treasurer and general manager or their equivalents may be retained by foreign
nationals beyond the period set forth herein and such officer is the owner or a
stockholder owning at least ten percent (10%) of the outstanding capital stock of
the registered enterprise and he/she remains the owner or maintains his

stockholdings therein.

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 No. 613, as amended, shall be
permitted to enter and reside in the Philippines during the period of employment

of such foreign nationals. They shall be issued multiple-entry visas, renewable

every two (2) years, and shall be allowed to enter and leave the Philippine
without further documentary requirements other than valid passports or other

travel documents in the nature of passports.

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The foreign nationals admitted hereit

|, as well as their respective spouses and
dependents, shall be exempt from: (1) obtaining alien certificates of registration
and emigration clearance certificates; and (2) securing the alien employment
permits and all types of clearances, permits, licenses or their equivalents required

by any government department or agency.

Section 17, Extension of Period of Availment. ~ The availment period of the
incentives provided herein may be extended by the SISEZA in the event that the
registered enterprise suffers operational force majeure or any event equivalent thereto,

impairing its viability.

Section 18. Duration of Incentives. — Enterprises registered with the SISEZA
may enjoy ITH or NOLCO granted by the latter prior to the availment of the five percent
(5%) tax rate on Gross Income Eamed.

Fiscal incentives under this Act shall be terminated after a cumulative period of twenty
(20) years from the date of registration or the start of commercial operation, whichever is

applicable, except that it could be extended with regard to industries deemed

indispensable to national development as determined by SISEZA.
The industries exempted from this provision shall be recommended by the BOI, with the

concurrence of the secretaries of the DOF and the DTI.

Section 19. Incentive to Investors. - Any foreign national covered under
subsection (m) of Section 16 of this Act, who invests an amount of One Hundred Fifty
Thousand US Dollars (US$150,000.00),
enterprise shall be entitled to an investor's visa:

ier in cash and/or equipment, in a registered
Provided, That,

(a) He is at least eighteen (18) years of age:

(b) He has not been convicted of a crime involving moral turpitude:
(©) He is not affficted with any loathsome, dangerous or contagious disease; and

(4) He has not been institutionalized for any mental disorder or disability: Provided,
further, that in securing the investor's visa, the alien-applicant shall be entitled to the

same privileges provided for under Section 16(m), last paragraph.

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As a holder of an investor's visa, an alien shall be entitled to reside in the
Philippines while his investment subsists. For this purpose, he shall submit an annual

report, in the form duly prescribed for the purpose, to prove that he has maintained his

investment in the country. Should said alien withdraw his investments from the

Philippines, then the investor’s visa issued to him shall automatically expire.

Section 20. Banking Rules and Regulations. - Existing banking laws and
rules/regulations of the BSP shall apply to banks and financial institutions to be
established in the Samal Island Ecozone, such as those governing foreign exchange and
other current account transactions (trade and nontrade), local and foreign borrowings,
foreign investments, establishment and operation of local and foreign banks, foreign

currency deposit units, offshore banking units and other financial institutions under the

supervision of the BSP.

Section 21. Remittance of Earnings. In the case of foreign investments, a
registered enterprise in the SISEZA shall have the right to remit earnings from the
investment in the currency in which the investment was originally made and at the
exchange rate prevailing at the time of remittance, subject to the provisions of Section 74
of Republic Act No. 265 (The New Central Bank Act), as amended.

CHAPTER V

NATIONAL GOVERNMENT AND OTHER ENTITIES.

Section 22. Interpretation/Construction. — The powers, authorities and

functions that are vested in the S|

are intended to decentralize governmental
functions and authority and promote an efficient and effective working relationship

among the Samal Island Ecozone, the national government and the LGUs.


i

weno

Section 23. Supervision and Coordination of Development Plans. — For
purposes of policy direction and coordination, the Samal Island Ecozone shall be under

the direct control and supervision of the Office of the President of the Philippines.

Section 24. Authority of the Bureau of Customs to Examine the Entry and
Exit of Imported Articles in the Samal Island Special Economic Zone. - ‘The BOC, in
coordination with the appropriate government agencies such as, but not limited to, the
Departments of Trade and Industry, Agriculture, Transportation and Communications,
and Health shall have the authority to examine the entry and exit of imported articles in
the Samal Island Special Economic Zone for the purpose of determining: (a) the quantity
and description of subject imported articles, and (b) the compliance with the sanitary and

agricultural requirements.

Section 25, Relationship with the Regional Development Couneil, — The
SISEZA shall determine the development goals for the Samal Island Ecozone within the
framework of national development plans, policies and goals. The administrator shall,
upon approval by the Board, submit the Samal Island Ecozone plans, programs and
projects to the Regional Development Council for inclusion and inputs to the overall

regional development plan.

Section 26. Relationship with LGUs. — Except as herein provided, the LGUs
comprising the Samal Island Ecozone shall retain their basic autonomy and identity. The
Island Garden City of Samal shall operate and function in accordance with the Local
Government Code of 1991, as amended. In case of any conflict among the SISEZA and
the Island Garden City of Samal on matters affecting the Samal Island Ecozone other

than defense and security matters, the decision of the SISEZA shall prevail.

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CHAPTER VI.
MISCELLANEOUS

Section 27. Separability Clause. ~ If any provision of this Act shall be held

unconstitutional or invalid, the other provisions not otherwise affected shall remain in full

force and effect.

Section 28. Repealing Clause. ~ All laws, executive orders or issuances, or any

part thereof which are inconsistent herewith are hereby repealed or amended accordingly.

Section 29. Effectivity Clause. — This Act shall take effect fifteen (15) days

after its publication in at least two (2) national newspapers of general circulation.

Approved,

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