FOURTEENTH CONGRESS OF THE 
REPUBLIC OF THE PHILIPPINES ) 
First Regular Session 
) 
Introduced by Senator JUAN MIGUEL F. ZUBlRl 
EXPLANATORY NOTE 
This Bill seeks to establish the Special Economic Zone and Freeport in the 
Municipalities of San Juan and Cabugao, all in the Province of llocos Sur. 
The Municipalities of San Juan and Cabugao have in the past years, 
attracted businesses and investors in the region, and have the potential to 
become the province's economic hub. Strategically located and endowed with 
natural resources, the area is accessible to local and international market and to 
modern air and sea transport facilities. More importantly, the labor force in the 
area is composed of highly skilled, efficient workers desirous of opportunities to 
fully maximize their talent and expertise. Considering these factors, the 
Municipalities of San Juan and Cabugao are an ideal location to put up a 
decentralized and self-reliant industrial, commercial, trading and financial 
investment center and Freeport. 
As envisioned, the Salomague Freeport shall be operated as a separate 
customs territory that will basically provide incentives to ensure the free flow and 
movement of goods and commodities within the Freeport area and their 
exportation therefrom. Likewise, it shall provide tax-based incentives for business 
activities and concerns locating and operating within the Freeport premises, not 
to mention other non-tax benefits like liberal exchange policies and the grant of 
permanent resident status to investors. 
This economic zone will definitely be a big help to the government's efforts 
to reduce poverty and depravity by creating more jobs and promoting 
development. Establishing a Special Economic Zone and Freeport Authority in 
the area will undoubtedly incite more economic activity and spur fiscal autonomy 
for the province of llocos Sur. It cannot be denied after all, that in the world of 
market investment and the community of investors, a country must really look 
beyond the traditional way of doing things, that it must innovate to invent 
opportunities where and by it can give the investors the maximum value for their 
investments. 
In view of the foregoing, approval of this bill is earnestly sought. 


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FOURTEENTH CONGRESS OF THE 
) 
REPUBLIC OF THE PHILIPPINES ) 
First Regular Session 
) 
SENATE 
Introduced by Senator JUAN MIGUEL F. ZUBlRl 
AN ACT 
ESTABLISHING THE SPECIAL ECONOMIC ZONE AND FREEPORT IN THE 
PROVINCE OF ILOCOS SUR, CREATING FOR THIS PURPOSE THE ILOCOS SUR 
SPECIAL ECONOMIC ZONE AND FREEPORT AUTHORITY, APPROPRIATING 
FUNDS THEREFOR AND FOR OTHER PURPOSES 
Be it enacted by the Senate and House of Representatives of the Philippines 
in Congress assembled: 
SECTION I. Short Title. - This Act shall be known as the "llocos Sur Special 
Economic Zone and Freeport Act of 2007". 
Declarafion of Policy. - 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 living conditions through the 
establishment, among others, of special economic zones and freeports in suitable and 
strategic locations in the country and through measures that will attract legitimate and 
productive foreign investments. 
SEC. 2. 
SEC. 3. 
Creation of the llocos Sur 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 llocos Sur affected by the zone, there 
is hereby established a special economic zone and freeport in the Province of llocos 
Sur to be known as the llocos Sur Special Economic Zone and Freeport, hereinafter 
referred to as the llocos Sur ECOZONE. The llocos Sur ECOZONE shall cover the 
entire Salomague Cove and the area embraced by the barangays of Dardarat, 
Solotsolot, Surngit and Refaro in the Municipality of San Juan as well as Dardarat, Pila, 
Sagayaden, Salomague, Sabang, Namruangan, Salapasap, Daclapan, Pug-os, Turod 
and Baclig in the Municipality of Cabugao. The specific metes and bounds Of the IIOCOS 


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Sur Ecozone shall be more particularly defined in a presidential proclamation that shall 
be issued for this purpose. 
SEC. 4. 
Governing Principles. - The llocos Sur ECOZONE shall be 
managed and operated by the 1Iocos Sur Special Economic Zone and Freeport 
Authority, hereinafter referred to as the ISSEZFA, created under Section 10 of this Act, 
under the following principles: 
(a) Within the framework and limitations of the Constitution and applicable 
provisions of the Local Government Code, the llocos Sur ECOZONE shall be developed 
into and operated as a decentralized, self-reliant and self-sustaining industrial, 
commercial/trading, agro-industrial, tourist, banking, financial and investment center 
with suitable residential areas. 
(b) The llocos Sur 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 llocos Sur and its neighboring towns and cities. 
(c) The llocos Sur 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 (DTI), 
with foreign entities or enterprises. 
(d) Foreign citizens and companies owned by non-Filipinos in whatever 
proportion may set up enterprises in the llocos Sur ECOZONE, either by themselves or 
in joint venture with Filipinos in any sector of industry, international trade and commerce 
within the llocos Sur ECOZONE. 
(e) The llocos Sur ECOZONE shall be managed and operated as a separate 
customs territory, thereby ensuring the free flow or movement of goods and capital 
within, into and out of the llocos Sur ECOZONE and shall likewise provide incentives 
such as tax and duty-free importations of raw materials and capital equipment to 
registered enterprises located therein. However, exportation or removal of goods from 
the territory of the llocos Sur 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; 
(f) The areas comprising the llocos Sur ECOZONE may be expanded or 
reduced when necessary. For this purpose, the ISSEZFA, 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 llocos Sur ECOZONE for the 
following purposes: (1) consolidation of lands for llocos Sur Ecozone development; (2) 


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acquisition of right-of-way to the llocos Sur ECOZONE; and (3) the protection of 
watershed areas and natural assets valuable to the prosperity of the llocos Sur 
ECOZONE. 
(9) Goods manufactured by an llocos Sur ECOZONE enterprise shall be made 
available for immediate retail safe in the domestic market, subject to the payment of 
corresponding taxes on raw materials and other regulations that may be formulated by 
thg ISSEZFA, together with the PEZA, the Bureau of Customs (BoC) and the DTI in 
accordance with the NlRC of 1997, as amended, and the Tariff and Customs Code of 
the Philippines, as amended, 
However, in order to protect domestic industries, a 
Negative List of industries shall be drawn up and regularly updated by the PEZA. 
Enterprises engaged in industries included in such Negative List shall not be allowed to 
sell their products locally, and 
(h) The defense of the llocos Sur ECOZONE and the security of its perimeter 
fence shall be the responsibility of the national government (NG) in coordination with the 
llocos Sur ECOZONE and the LGUs. For this purpose, a special defense team shall be 
organized to define its power, duties and responsibilities. 
SEC. 5. 
Incentives to Registefed Enterprises. - The ISSEZFA shall 
provide the following incentives to the registered enterprises located therein to the 
extent of the activity/project: 
(a) lncome Tax Holiday (ITH) - Registered enterprises shall be entitled to an 
income tax holiday from the start of their commercial operations to the extent of their 
activity under the following categories: 
(1) Category A - Registered domestic enterprises located in highly developed 
areas, as determined by the Board of Investments (BOI), shall be entitled to 
a four-year income tax holiday. 
(2) Category B - Registered domestic enterprises on the following shall be 
entitled to a six-year income tax holiday: 
(i) Located in less developed areas as defined by the BOI; or 
(ii) Producing/rendering new products/services or having strong backward 
or forward linkages. 
(3) Category C - Registered export enterprises shall be entitled to a six-year 
income tax holiday: Provided, finally, That if the export enterprise complies 
with the following: 
(i) Large capital investments or sizeable employment generation; or 
(ii) Use high level of technology: or 
(iii) Located outside Metro Manila, it shall be entitled to an eight-year ITH. 
Registered enterprises embarking on new investments that are listed in the 
current Investment Priorities Plan (IPP) shall be entitled to incentives provided herein 
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pertaining to the new investments and subject to such terms and conditions as the BO1 
may determine. 
Additional investments in the project shall be entitled to the ITH corresponding 
to such investments as may be determined by the 501. 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 times the period provided under this subsection: Provided, however, That the total 
ITH period for an export enterprise availing of an eight-year ITH shall not exceed twenty 
(20) years. Any unused incentives shall therefore be deemed forfeited if not used 
during the incentive period. 
Enterprises registered with the ISSEZFA are required to share in the special 
development fund of the BO1 for investment promotion projects of the 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 
eligibiiity from the ISSEZFA before submitting its income tax return (ITR) with the 
ISFEZFA for validation. 
Failure to secure certification and/or to file the ITH or the NOLCO availment for 
validation by the ISSEZFA within 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. 
(b) Nef Operating Loss Carryover (NOLCO) - The net operating loss of the 
business or enterprise during the first three 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 consecutive 
years immediately following the year of such loss: Provided, however, That operating 
loss resulting from 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) lmposifion of a Tax Rate of Five Percent (5%) on Gross lncome Earned 
(GI€) - Except for real property tax on land, no local and national taxes, as prescribed 
under Republic Act No, 8424, also known as "the National Internal Revenue Code of 
1997, As Amended", such as the income tax, the excise tax and the franchise taxes 
shall be imposed on business establishments operating within the llocos Sur 
ECOZONE. In lieu thereof, five percent (5%) of the gross income earned by all the 
business enterprises with the ISSEZFA and remitted as follows: 
(1) Two per centurn (2%) to the National Government; 
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(2) Two per centum (2%) to the province of llocos Sur; 
(3) One-half per centum (%%) to be shared by the municipalities affected by the 
declaration of the ISSEZFA in proportion to their income from business 
activities of the zone; and 
(4) One-half per centum (’/%) to the ISSEZFA 
All persons and service establishments in the llocos Sur ECOZONE that are 
not covered by Section 5 hereof shall be subject to national and local taxes under the 
NlRC of 1997, as amended, and the Local Government Code. 
(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 NlRC of 1997, as amended. 
(e) Capital Equipment lncentives - (1) Importations of capital equipment, spare 
parts, tools and dye, or those required for pollution abatement and control, cleaner 
production and waste reduction including consignment thereof by registered enterprises 
upon the effectivity of this law shall be exempted to the extent of one hundred percent 
(100%) of the taxes and customs duties: Provided, That the importation thereof shall be 
used exclusively by the registered enterprise in its registered activity within the llocos 
Sur ECOZONE. Provided, further, That the importation of machinery and equipment 
and accompanying parts shall comply with the following conditions: 
(1) These are not manufactured domestically in sufficient quantity, of 
comparable quality and at reasonable prices; 
(2) These are reasonably needed and will be used exclusively by the 
registered enterprise in the manufacture of its products, unless prior 
approval of the ISSEZFA is secured for the part-time utilization of said 
equipment in a non-registered activity to maximize usage thereof or the 
proportionate taxes and duties are paid on a specific equipment and 
machinery being permanently used for non-registered activities; and 
(3) Approval of the ISSEZFA was obtained by the registered enterprise for the 
importation of such machinery, equipment and spare parts. 
Approval of the ISSEZFA 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 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; 
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(ii) 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 sold; 
documents or those required for pollution abatement and control; and 
(iii) Exportation of the capital equipment, machinery, spare parts or source 
(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 years from the date of importation, the 
registered enterprise and the 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 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. 
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. 
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 Department of Finance (DOF) of the bill of materials 
evidencing the transaction value of such and other pertinent documents, for verification 
and proper endorsement. 
The registered export enterprise availing of the incentive provided under the 
immediately preceding two paragraphs shall be subject to the following: (i) that said 
capital equipment, machinery and spare parts will be used exclusively by the registered 
enterprise 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 ISSEZFA is 
obtained 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. 
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This incentive shall be deemed waived if application for tax credit under this 
subsection was not filed within one year from the date of delivery. 
(f) The importation of source documents by information technology-registered 
enterprises shall be eligible for tax and duty free importation. 
(9) 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 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 ( I O )  years from the date of registration 
of commercial operation of the enterprise shali be exempt from all taxes and duties: 
Provided, That such breeding stocks and genetic materials are reasonably needed in 
the registered activity and approved by the ISSEZFA. 
The availment of the incentives by a registered enterprise shall be subject to 
the following: (i) that said breeding stocks and genetic materials would have been 
qualified for tax- and duty-free importation under the preceding paragraph; (ii) that the 
breeding stocks and genetic materials are reasonably needed in the registered activity; 
(hi) that approval of the ISSEZFA has been obtained by the registered enterprise; and 
(iv) that the purchase is made within ten (IO) 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 year from the date of delivery. 
(i) Exemption From Wharfage Dues - The provisions of law to the contrary 
notwithstanding, exports by a registered enterprise shall be exempted from whatfage 
dues. 
(j) Deferred lmposition of the Minimum Corporate lncome Tax - The minimum 
corporate income tax (MCIT) of two percent (2%) of the gross income as of the end of 
the taxable year shall be imposed when the MClT is greater than the incnme tax 
computed under the NlRC of 1997, as amended, for the taxable year: 
Provided, 
however, That said MClT shall be imposed only after the enterprise's entitlement period 
to the income tax-based incentives. 
(k) (1 ) Tax Treatment of Merchandise in the /locos Sur ECOZONE - 


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(i) 
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 llocos Sur 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 llocos Sur 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 llocos Sur 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 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 llocos Sur 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 ISSEZFA 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 
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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 llocos Sur 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: 
(viii) Unless the contrary is shown, merchandise taken out of the export 
processing zone shall be considered for tax purposes to have been 
sent to customs territory. 
(2) Tax Treatment of Merchandise in the /locos Sur ECOZONE - The free 
trade/freeport zone shall be operated and managed as a separate customs territory 
ensuring free flow or movement of goods within, into and exported out of the free 
trade/freeport zone. Importations of raw materials and capital equipment are tax- and 
duty-free. 
However, exportations or removal of goods from the free trade/freeport 
zones to the other parts of the Philippine territory shall be subject to customs and 
internal revenue regulations. 
(3) Tax Treatment of Services in the llocos Sur EGOZONE - 
(i) Sale of service by an entity from the customs territory to a registered 
ecozone or free trade enterprise, or by a registered ecozone or 
freeport enterprise to another ecozone or freeport 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 or freeport enterprise to the 
customs territory shall be subject to applicable internal revenue laws 
and regulations. 
(I) 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, as amended, a registered enterprise may employ 
foreign nationals in supervisory or technical positions for a period not exceeding ten (1 0) 
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 remains the owner or maintains his stockholdings therein. 


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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 a multiple-entry visa, valid for a period of 
three years, and shall be allowed to enter and leave the Philippines without further 
dopmentary requirements other than valid passports or other travel documents in the 
nature of passports. The validity of the multiple-entry visa shall be extendible yearly. 
The foreign nationals admitted herein, as well as their respective spouses and 
dependents, shall be exempt from: (i) obtaining alien certificate of registration and 
emigration clearance certificates; and (ii) securing the alien employment permit (AEP) 
and all types of clearances, permits, licenses or their equivalents required by any 
government department or agency. 
SEC. 6. 
Incentive to Investors. - Any foreign national covered under 
subsection (m) of Section 5 of this Act, who invests an amount of One Hundred Fifty 
Thousand US Dollars (US$150,000.00), either in cash andlor equipment, in a registered 
enterprise shall be entitled to an investor’s visa: Provided, That, 
(a) He is at least eighteen (18) years of age; 
(b) He has not been convicted of a crime involving moral turpitude: 
(c) He is not afflicted with any loathsome, dangerous or contagious disease: 
and 
(d) 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 5(M), last paragraph. 
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 should 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. 
The ISSEZFA shall be responsible for the administration and implementation of the 
incentives granted to its respective registered enterprises: Provided, That any incentive 
administration policy adopted by the BO1 for 
incentives common to all registered 
enterprises shall be uniformly applied by the ISSEZFA. 
SEC. 7. 
Administration, Implementation and Monitoring of Incentives. 
The following are the duties and responsibilities of the ISSEZFA in the 
administration of incentives: 
(a) Adopt consistent procedures of administering incentives in accordance with 
the guidelines established by the BO1 and to amend the same when necessary: 
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(b) Adopt and implement systems and procedures affecting trade and customs 
policies in accordance with the requirements established by the DOF and the BO1 and 
to amend the same when necessary; 
(c) Submit data and information to the DOF and the BO1 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 responsibilities as may be required by the 
President. 
For proper monitoring, the BO1 shall. create a single database of all incentives 
provided by all incentives granting agencies,, including the ISSEZFA and all information 
thereto. Double-entry accounting shall be done by the BO1 in recording all incentives 
granted by the government for transparency purposes. 
SEC. 8. 
Extension of Period of Availment. - The availment period of the 
incentives provided herein may be extended by the ISSEZFA in the event that the 
registered enterprise suffers operational force majeure or any event equivalent thereto, 
impairing its viability. 
SEC. 9. 
Duration of Incentives. - Enterprises registered with the ISSEZFA 
may enjoy ITH or NOLCO granted by the latter prior to the availment of the five percent 
(5%) GIE. 
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 ISSEZFA. 
The industries exempted from this provision shall be recommended by the BOI, 
with the concurrence of the secretaries of the Department of Finance and of Trade and 
Industry. 
SEC.lO. Creation of the Ilocos Sur Special Economic Zone and 
Freeport Authority. - There is hereby created a body corporate to be known as the 
llocos Sur Special Economic Zone and Freeport Authority, hereinafter referred to as the 
ISSEZFA, which shall manage and operate the llocos Sur ECOZONE in accordance 
with the provisions of this Act. This 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. 
SEC. 11. Principal Office of the ISSEZFA. - The ISSEZFA shall maintain 
its principal office in the Municipality of Cabugao, Province of llocos Sur, but it may 
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establish branches within the Philippines as may be necessary for the proper conduct of 
its business. 
Powers and Funcfions of the ISSEZFA. - The ISSEZFA shall 
SEC. 12. 
have the following functions: 
(a) Operate, administer, manage and develop the llocos Sur ECOZONE 
according to the principles and provisions set forth in this Act; 
(b) Recommend to the President the issuance of a proclamation to fix and 
delimit the site of the llocos Sur ECOZONE; 
(c) Register, regulate and supervise the enterprises in the llocos Sur 
ECOZONE in an efficient and decentralized manner, subject to existing laws; 
(d) Coordinate with LGUs and exercise general supervision over the 
development plans, activities and operations of the llocos Sur ECOZONE; 
(e) Authorize or undertake, on its own or through others, and regulate the 
establishment, operation and maintenance of public utilities, services, and infrastructure in 
the llocos Sur Zone such as shipping, barging, stevedoring, cargo handling, hauling, 
warehousing, storage of cargo, port services or concessions, piers, wharves, bulkheads, 
bulk terminals, mooring areas, storage areas, roads, bridges, terminals, conveyors, water 
supply and storage, sewerage, drainage, airport operations in coordination with the Civil 
Aeronautics Board, and such other services or concessions or infrastructure necessary or 
incidental to the accomplishment of the objectives of this Act: Provided, however, That the 
private investors in the Zone 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 Zone; 
(f) Regulate and undertake the establishment, operation and maintenance of 
utilities, other services and infrastructure in the llocos Sur ECOZONE such as, but 
not limited to, heat, light and power, water supply, telecommunications, transport, toll 
roads and bridges, port services, etc. and to fix just, reasonable and competitive 
rates, fares, charges and prices thereof; 
(9) 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 infrastructure required or needed 
for the operation and development of the llocos Sur ECOZONE, in coordination with 
appropriate national and local government authorities and in conformity with applicable 
laws thereon; 
(h) Operate on its own, either directly or through a subsidiary entity or licenses 
to others, tourism-related activities, including games, amusements, recreational and 
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sports facilities, such as horse racing, dog racing, gambling casinos, game of chance, 
golf courses and others, under priorities and standards set by ISSEZFA; 
(i) Subject to the approval of the President 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; 
0) 
Provide security for the llocos Sur ECOZONE in coordination with the 
national and local governments. Military forces sent by the NG for the purpose of 
defense shall not interfere in the internal affairs of the llocos Sur ECOZONE and 
expenditures for these military forces shall b'e borne by the NG. For this purpose, the 
ISSEZFA may establish and maintain its security forces and firefighting capability or hire 
others to provide the same; 
(k) Protect, preserve, maintain and develop the virgin forests, beaches, coral 
and coral reefs, and maintain ecological balance within the llocos Sur ECOZONE; 
of the ISSEZFA as it may deem necessary; 
(I) 
Create, operate and/or contract to operate such functional units or offices 
(m) 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; 
(n) Issue certificates of origin for products manufactured or processed in the 
llocos Sur ECOZONE in accordance with prevailing rules of origin, and the pertinent 
regulations of the PEZA, the DTI and/or the DOF; 
(0) Issue working visas renewable every three( 3) years to foreign executives 
and foreign technicians with highly specialized skills which no Filipino possesses, as 
certified by the Department of Labor and Employment; 
(p) Report to the Bureau of Immigration the names of the foreigners who have 
been granted permanent resident status and working visas within thirty (30) days after 
issuance of such grant; 
(9) 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 
(r) 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. 
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SEC. 13. 
Tax Exemptions. - The ISSEZFA is hereby declared exempt from 
the payment of all taxes, duties, fees, imports, 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 
ISSEZFA 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 ISSEZFA and of its projected capital and operating expenditures. 
Furthermore, all donations made by any person or entity in favor of the 
ISSEZFA 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 NlRC of 
1997, as amended. 
Banking Rules and Regdafions. - Existing banking laws and 
rules/regulations of the BSP shall apply to banks and financial institutions to be 
established in the llocos Sur 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. 
SEC. 14. 
SEC. 15. 
Remittance of Earnings. - In the case of foreign investments, a 
registered enterprise in the ISSEZFA 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 remiitance, subject to the provisions of Section 
74 of Republic Act No. 265, as amended. 
SEC. 16. 
Board of Directors of the ISSEZFA. - The powers of the ISSEZA 
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 chairman who shall, at the' same time, be the administrator of the 
ISSEZFA; 
(b) A vice chairman who shall come from among the members of the Board; 
(c) Members consisting of: 
(1) The governor of the Province of llocos Sur; 
(2) The congressional representative of the district covering the site of the 
llocos Sur ECOZONE; 
(3) The mayors of the municipalities of Cabugao and San Juan; 
(4) One representative from the domestic investors; 
(5) One representative from the,foreign investors; and 
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(6) Two representatives from labor from among the workers in the llocos 
The governor, the congressional representative and the mayors of the 
municipalities of Cabugao and San Juan shall serve as ex oMcio members of the Board, 
whose terms in the Board correspond to their term as elected officials. 
Sur ECOZONE. 
The chairman 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 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. 
Except for the representatives of the business and labor sectors, no person 
shall be appointed by the President of the Philippines as a member of the Board unless 
he is 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 ( I O )  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 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,OOO.OO) for 
every Board meeting. 
SEC. 17. 
Powers and Duties of the Chairman-Administrator. - The 
chairman-administrator shall have the following powers and duties: 
(a) Direct and manage the affairs of the ISSEZFA in accordance with the 
policies of the Board; 
(b) Establish the internal organization of the ISSEZFA under such conditions 
that the Board may prescribe; 
for its approval; 
(c) Submit an annual budget and necessary supplemental budget to the Board 
(d) Submit within thirty (30) days after the close of each fiscal year an annual 
report to the Board and such other reports asmay be required; 
(e) Submit to the Board for its approval policies, systems, procedures, rules 
and regulations that are essential to the operation of the llocos Sur ECOZONE; 
(f) 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 in the llocos Sur ECOZONE; and 
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(9) Perform such other duties as may be assigned to him by the Board or 
which are necessary or incidental to his office. 
SEC. 18. 
Organization and Personnel. - The Board of Directors of the 
ISSEZFA shall provide for an organization and staff of its officers and employees. Upon 
recommendation of the chairman-administrator, the Board shall appoint and fix the 
remuneration and other emoluments of its officers and employees in accordance with 
existing laws on compensation and position classification: Provided, That the Board 
shall have exclusive and final authority to promote, transfer, assign or reassign officers 
of the ISSEZFA, any provision of existing law to the contrary notwithstanding: Provided, 
fulther, That the chairman-administrator may carry out removal of such officers and 
employees. 
The officers and employees of the ISSEZFA, 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 ISSEZFA, subject to civil service laws and 
regulations, shall be removed or suspended except for cause, as provided by law. 
SEC. 19. General Manager. - The Board of Directors of the ISSEZFA shall 
appoint a full-time professional and competent administrator and chief executive officer 
for the ISSEZFA whose compensation shall be determined by its Board of Directors and 
shall be in accordance with the revised compensation and position classification 
system. The administrator as chief executive officer of ISSEZFA shall be responsible to 
thb Board and the President of the Philippines for the efficient management and 
operation of the ISSEZFA. 
SEC. 20. Applicability Clause. - The provisions of Sections 30 to 41 of 
Republic Act No. 7916, 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 ISSEZFA. 
SEC. 21. 
Capitalization. - The ISSEZFA shall have an authorized capital 
stock of Two Billion (2,000,000,000) no par shares with a minimum issue of Ten Pesos 
(P10.00) each, the majority shares of which shall be subscribed and paid for by the NG 
and the LGUs embracing the llocos Sur ECOZONE. The Board of Directors of the 
ISSEZFA may, with the written concurrence of the Secretary of Finance, sell shares, 
representing not more than forty per centurn (40%) of the capital stock of the ISSEZFA 
to the general public under such policy as the Board and the Secretary of Finance may 
determine. The NG and the LGUs shall, in no case, own less than sixty per centurn 
(60%) of the total issued and outstanding capital of the ISSEZFA. 
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The amount necessary to subscribe and pay for the shares of the NG to the 
capital stock of the ISSEZFA shall be included in the annual General Appropriations 
Act. For LGUs, the funds shall be taken from their internal revenue allotment and other 
local funds. 
SEC. 22. 
Supervision and Coordination of Development Plans. - For 
purposes of policy direction and coordination, the llocos Sur ECOZONE shall be under 
the direct control and supervision of the Office of the President. 
Relationship with the Regional Development Council. - The 
ISSEZFA shall determine the development goals for the llocos Sur ECOZONE within 
the framework of national development plans, policies and goals. The administrator 
shall, upon approval by the Board, submit the llocos Sur ECOZONE plans, programs 
and projects to the Regional Development Council for inclusion and inputs to the overall 
regional development plan. 
SEC. 24. 
SEC. 23. 
Relationship with LGUs. - Except as. herein provided, the LGUs 
comprising the llocos Sur ECOZONE shall retain their basic autonomy and identity. 
The municipalities of Cabugao and San Juan, llocos Sur shall operate and function in 
accord,ance with the Local Government Code of 1991. In case of any conflict among 
the ISSEZFA and the municipalities of Cabugao and San Juan, llocos Sur on matters 
affecting the llocos Sur ECOZONE other than defense and security matters, the 
decision of the ISSEZFA shall prevail. 
SEC. 25. 
Legal Counsel. - The llocos Sur Special Economic Zone Authority 
and the corporations in which ISSEZFA owns a majority of the issued capital stock 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 ISSEZFA 
may engage the services of an outside counsel either on a case to case or on a fixed 
retainer basis. 
SEC. 26. InterpretationKonstruction. -The powers, authorities and functions 
that are vested in the ISSEZFA are intended to decentralize governmental functions and 
authority and promote an efficient and effective working relationship among the llocos 
Sur ECOZONE, the NG and the LGUs. 
SEC. 27. 
Auditing. - The 
Commission on Audit 
shall appoint a 
representative who shall be a full-time auditor of the ISSEZFA and assign such number 
of 'personnel as may be necessary to assist said representative in the performance of 
hislher duties. The salaries and emoluments of the assigned auditor and personnel 
shall be in accordance with pertinent laws, rules and regulations. 
SEC. 28. 
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. 
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SEC. 29. 
Repealing Clause. - All laws, executive orders or issuances, or 
any part thereof which are inconsistent herewith are hereby repealed or amended 
SEC. 30. 
Effectivity Clause. - This Act shall take effect fifteen (15) days 
after publication in at least two (2) national newspapers of general circulation. 
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