Republic of the Philippines
HOUSE OF REPRESENTATIVES
‘Quezon City, Metro Manila

FIFTEENTH CONGRESS
First Regular Session

House BillNo._ 4053

Introduced by HON. SIGFRIDO R. TINGA

EXPLANATORY NOTE

This bill seeks to require enterprises and business establishments enjoying the Income Tax
Holiday (“ITH”) incentive under Rep. Act No. 7916, or the Special Economic Zone Act of 1995 (“PEZA
Law”), to pay Service Fees to their host cities or municipalities during the ITH period.

In the case of Commissioner of Internal Revenue vs. Sekisui Jushi, 496 SCRA 206 (2006), the
Supreme Court clarified that if an entity registered with the Philippine Economic Zone Authority
(“PEZA”) avails itself of ITH as a fiscal incentive, it is exempt from income taxes only but not from other
national internal revenue taxes. The ruling in that case arguably recognizes that PEZA-registered
enterprises and business establishments have to pay their local taxes even during the ITH period. It has
been observed, however, that some sectors interpret Section 24 of the PEZA Law to mean that, during the
ITH period, no local taxes may be collected from PEZA-registered: enterprises and business
establishments other than real property tax on land.

Both sides to this ongoing debate raise valid and convincing arguments. However, the debate
cannot be allowed to go on ad infinitum since it fosters uncertainty in our business policies that
discourages direct investments that the country sorely needs. The vacuum has to be addressed if only to
provide consistency in local tax enforcement and implementation.

Itis respectfully submitted that the compromise lies in requiring PEZA-registered enterprises and
business establishments to pay Service Fees to their host cities or municipalities during the ITH period.

After all, these enterprises and business establishments benefit from the basic services provided by the


LGUs even during the ITH period. Equity dictates that these PEZA-registered enterprises and business

establishments share in the burden of providing these services.

In view of the foregoing, approval of this bill is earnestly sought.



Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

FIFTEENTH CONGRESS
First Regular Session

HOUSE BILL NO._ 4053

Introduced by HON. SIGFRIDO R. TINGA

AN ACT

REQUIRING BUSINESSESS/ENTERPRISES WITHIN ECOZONES TO PAY SERVICE FEES
TO THEIR HOST CITIES OR MUNCIPALITIES, AND FOR THIS PURPOSE, AMENDING
REPUBLIC ACT NUMBERED SEVENTY-NINE HUNDRED SIXTEEN, OTHERWISE
KNOWNS AS “THE SPECIAL ECONOMIC ZONE ACT OF 1995”.

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

SECTION 1. Section 24 of Republic Act No. 7916, as amended, is hereby further
amended to read as follows:

“Section 24. Exemption from National and Local Taxes. ~ Except for real property
taxes on land owned by developers, no taxes, fees, assessments, or collections
whatsoever, local and national, shall be imposed on business establishments
operating within the ECOZONE. In lieu thereof, five percent (5%) of the gross
income earned by all business enterprises within the ECOZONE shall be paid and
remitted as follows:

(a) Three percent (3%) to the National Government;


(b) — Two percent (2%) which shall be directly remitted by the business
establishments to the treasurer’s office of the municipality or city
where the enterprise is located.”

If qualified to avail of the income tax holiday incentive under Executive Order

No. 226 or the Omnibus Investments Code of 1987, as_amended, business

establishments operating within the ECOZONE shall, during such availment,
remit no later than the 15" of Ap)

of every vear to the treasurer's office of

the city or munici

ity an annual service fee to be computed based on the

aggregate floor area of the business establishment located within the city or
municipality as follows:

Aggregate Floor Area Service Fee Per Annum
f the Business Establishment (per square meter)
1,500 sq. m. and above Php 25.00/sq.m.

1,000 sq. m. or more but less than 1,500 sq.m. | PhP 50.00/sq.m.

500 sq. m. or more but less than 1,000 sq. m. PhP 100.00/sq.m.

200 sq. m. or more but less than 500 sq. m. PhP 150.00/sq.m.
100 sq. m. or more but less than 200 sq. m. PhP 200.00/sq.m.

Other than the annual service fee provided herein, no local taxes, fees, imposts,
collections or assessments may be imposed on business establishments operating
within the ECOZONE during the income tax holiday period.”

SECTION 2. Repealing Clause. ~ All laws, executive orders, rules and regulations or
parts thereof which may be inconsistent with the provisions of this Act are hereby repealed or
amended accordingly.


SecTION3. Transitory Provisions. - Enterprises or business establishments with
pending applications for registration with the Philippine Economic Zone Authority shall be
given thirty (30) days from the effectivity of this Act to notify the Philippine Economic
Zone Authority whether they intend to pursue their application for registration as an
ECOZONE enterprise, in the absence of which, their application shall be deemed

automatically withdrawn.

SECTION 4. _ Effectivity. — This Act shall take effect within fifteen (15) days after its
publication in the Official Gazette or in two (2) newspapers of general circulation.

Approved.